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June 7, 2018 - Transcript of Rate Commission Technical Conference__________________________________ MSD Technical Conference for Surrebuttal June 7, 2018 __________________________________ MSD TECHNICAL CONFERENCE FOR SURREBUTTAL June 7, 2018 Dawn M. Bloemker, CSR, RPR, CCR Illinois CSR License No. 084-004554 Missouri CCR License No. 1039 (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 2 1 I N D E X O F E X A M I N A T I O N 2 WITNESS: BRIAN HOELSCHER 3 Examination By Mr. Palans .....................24 Examination By Mr. Brockmann ..................60 4 Examination By Mr. Mahfood ....................64 Examination By Mr. Stein ......................68 5 Examination By Mr. Goss .......................71 Examination By Mr. Beckmann ...................81 6 Examination By Mr. Goss .......................85 Examination By Mr. Palans .....................91 7 Examination By Ms. Stump ......................94 8 WITNESS: RICH UNVERFERTH 9 Examination By Mr. Goss .......................97 Examination By Mr. Palans .....................99 10 Examination By Ms. Stump .....................103 Examination By Mr. Mahfood ...................106 11 12 WITNESS: HENRIETTA LOCKLEAR 13 Examination By Mr. Neuschafer ................109 Examination By Ms. Stump .....................113 14 15 WITNESS: MARION GEE 16 Examination By Mr. Palans ....................119 Examination By Mr. Stein .....................123 17 Examination By Mr. Beckmann ..................125 Examination By Mr. Palans ....................126 18 Examination By Mr. Stein .....................129 Examination By Mr. Neuschafer ................131 19 20 21 22 23 24 25 (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 3 1 2 MSD TECHNICAL CONFERENCE FOR SURREBUTTAL 3 4 5 6 MSD TECHNICAL CONFERENCE FOR SURREBUTTAL, 7 with witnesses produced, sworn, and examined on June 7, 2018, between the hours of 9:09 a.m. and 8 12:35 p.m. on that day, at the Metropolitan Sewer District, 2350 Market Street, St. Louis, Missouri 9 63103, before Dawn M. Bloemker, Illinois Certified Shorthand Reporter, Missouri Certified Court Reporter, 10 and Registered Professional Reporter. 11 A P P E A R A N C E S 12 COMMISSIONERS: 13 Mr. Russell Hawes, Chairman 14 Mr. Gerald Beckmann Mr. Lloyd Palans 15 Mr. Brad Goss Mr. John Stein 16 Mr. Paul Brockmann Mr. Steve Mahfood 17 Mr. Chan Mahanta Ms. Mickey Croyle 18 COUNSEL: 19 Ms. Lisa O. Stump 20 Lashly & Baer 714 Locust Street 21 St. Louis, Missouri 63101 REPRESENTED: Rate Commission 22 Mr. Brian Malone 23 Lashly & Baer 714 Locust Street 24 St. Louis, Missouri 63101 REPRESENTED: Rate Commission 25 (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 4 1 Appearances (cont'd) 2 Mr. Brandon W. Neuschafer Bryan Cave Leighton Paisner, LLP 3 211 N. Broadway, Suite 3600 St. Louis, Missouri 63102 4 REPRESENTED: Missouri Industrial Energy Consumers 5 Ms. Susan Myers Metropolitan Sewer District 6 2350 Market Street St. Louis, Missouri 63103 7 REPRESENTED: Metropolitan Sewer District 8 ALSO PRESENT: 9 Ms. Pamela Lemoine, Consultant to the Rate Commission 10 Black & Veatch 16305 Swingley Ridge Road, Suite 230 11 Chesterfield, Missouri 63017 12 Ms. Nicole Young Lion CSG 13 915 Olive Street St. Louis, Missouri 63101 14 WITNESSES: 15 Mr. Brian Hoelscher 16 Mr. Richard Unverferth Ms. Henrietta Locklear 17 Mr. Marion Gee 18 19 20 21 22 23 24 25 (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 5 1 IT IS STIPULATED AND AGREED by and between 2 all parties that the MSD TECHNICAL CONFERENCE FOR 3 SURREBUTTAL may be taken in shorthand by Dawn M. 4 Bloemker, an Illinois Certified Shorthand Reporter, 5 Missouri Certified Court Reporter, and Registered 6 Professional Reporter, and afterwards transcribed into 7 typewriting by agreement of all parties and the 8 witness. 9 * * * * * 10 (The following has been transcribed 11 from an audio recording.) 12 MR. HAWES: It's 9:09 a.m., and I'd like to 13 call the meeting of the Rate Commission of the 14 Metropolitan St. Louis Sewer District to order. This 15 is the 2018 Stormwater Rate Change Proceeding. 16 My name is Russell Hawes, and I am the 17 vice-chairman of the Rate Commission of the 18 Metropolitan St. Louis Sewer District and will serve 19 as chair of this proceeding. 20 Mr. Stein, may we have a roll call, please. 21 MR. STEIN: Mr. Beckmann? 22 MR. BECKMANN: Present. 23 MR. STEIN: Mr. Brockmann? 24 MR. BROCKMANN: Present. 25 MR. STEIN: Mr. Bresnan? (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 6 1 Ms. Croyle? 2 MS. CROYLE: Present. 3 MR. STEIN: Mr. Goss? 4 MR. GOSS: Present. 5 MR. STEIN: Mr. Hawes? 6 MR. HAWES: Present. 7 MR. STEIN: Mr. Jones? 8 Mr. Mahanta? 9 MR. MAHANTA: Present. 10 MR. STEIN: Mr. Mahfood? 11 MR. MAHFOOD: Here, yes. 12 MR. STEIN: Mr. Palans? 13 MR. PALANS: Present. 14 MR. STEIN: Mr. Ratzki? 15 Mr. Schoedel? 16 Mr. Stein is present. 17 Mr. Toenjes? 18 Mr. Ziegler? 19 Mr. Chairman, we have a quorum. 20 MR. HAWES: Thank you, Mr. Stein. 21 "The Charter Plan of the District was 22 approved by the voters of St. Louis and St. Louis 23 County at a special election on February 9, 1954." 24 MS. STUMP: Mr. Hawes? 25 MR. HAWES: Yes, ma'am. (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 7 1 MS. STUMP: Perhaps we should address the 2 procedural issue before you get to read that 3 statement. 4 MR. HAWES: Okay. 5 MS. STUMP: Is that okay with you? 6 MR. HAWES: That's fine. 7 MS. STUMP: Everyone is aware we do not have 8 a court reporter at this time. There is one that will 9 be coming hopefully at some point this morning. The 10 Rate Commissions operational rules require that these 11 technical conferences be held on the record. So in 12 order to proceed, I would ask for the Rate Commission 13 to make a motion to waive that requirement until the 14 court reporter gets here and vote on that. 15 It is my understanding that this is being 16 recorded on audio, so the court reporter will take the 17 audio of the meeting and transcribe what occurs. 18 Should we proceed without the court reporter, it will 19 be very important that you speak into the microphone 20 so that the audio will pick it up, and I would like 21 for the record also to have Ms. Myers and 22 Mr. Neuschafer comment if they have any objection to 23 such a motion. 24 MR. NEUSCHAFER: This is Brandon Neuschafer. 25 I have no objection. (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 8 1 MS. MYERS: And this is Susan Myers. I have 2 no objection. 3 MS. STUMP: Okay. Mr. Palans? 4 MR. PALANS: How long are we waiting for the 5 court reporter? When will they arrive? 6 (Inaudible) 7 MR. PALANS: Is the recording audio 8 equipment reliable? 9 (Inaudible) 10 MR. PALANS: Have you been able to take 11 transcripts? Has a court reporter -- 12 (Inaudible) 13 Because my experience -- my experience with 14 recordings has been very mixed, and that's my only 15 concern if we are -- even with a recording, we are not 16 able to get an accurate transcript. 17 MS. STUMP: Well, I mean the Rate 18 Commission's option is to wait until the court 19 reporter gets here, or I suppose another option would 20 be to adjourn and do it tomorrow. 21 (Inaudible) 22 COMMISSIONER: Second that motion. 23 MR. HAWES: Motion second. 24 Discussion on that? 25 COMMISSIONER: My only concern is like if (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 9 1 the court reporter can't make an accurate transcript, 2 then this public hearing isn't going to be proper, I 3 don't believe. We can -- we're supposed to have a 4 transcript of this hearing, and I'm not -- that 5 doesn't inspire confidence when you tell me that well, 6 you don't -- you haven't -- you had a court reporter 7 transcribe from these audios, so I don't really know. 8 COMMISSIONER: (Inaudible) play back for us 9 right now (inaudible) this morning? Is that possible? 10 MR. HAWES: I would think maybe. Is it 11 possible? I don't know if we have playback 12 capabilities here. That's the only thing. We 13 probably have recording capabilities, but not 14 necessarily -- 15 (Inaudible) 16 MS. STUMP: I guess the other thing is, 17 would it be possible to -- I mean, could we get any 18 sort of timeline from the court reporter? 19 (Inaudible) 20 MS. STUMP: Okay. 21 (Inaudible) 22 MS. STUMP: Okay. So the information that 23 Ms. Belleville [phonetic] just provided to me is that 24 they still don't have a court reporter for us yet, and 25 they are going down their list, so they may not. (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 10 1 COMMISSIONER: May I make a suggestion, if 2 you think it's appropriate, of a motion that we 3 adjourn for 30 minutes to see what the timing will be 4 to have a court reporter present? 5 MR. HAWES: But we have a motion and a 6 second already on the floor, on the table. I think we 7 need to determine that. 8 (A short break was taken, and a new 9 recording began.) 10 MR. HAWES: Very good. Okay. We have a 11 motion and second on the table. Is there any further 12 discussion regarding what has been heard and the 13 quality of the recording? 14 COMMISSIONER: Mr. Chairman, I would just 15 like to ask if we have any update on the -- when the 16 court reporter will be arriving. 17 MS. STUMP: We do. The District just 18 informed me that they have a court reporter, and we're 19 anticipating 45 minutes probably. Well, no later than 20 10:30 then. 21 COMMISSIONER: Are we still in discussion? 22 MR. HAWES: Yes. 23 COMMISSIONER: Then I would suggest that we 24 wait 45 minutes in order to have a record that is 25 consistent with the records that we have made here (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 11 1 before; that we not rely upon a recording, a tape 2 recording; and that this proceeding be adjourned for 3 45 minutes to allow the court reporter to appear and 4 transcribe this. 5 COMMISSIONER: I have [inaudible] another 6 one has to leave [inaudible] quorum. 7 MR. HAWES: That is consideration, 8 certainly. 9 [Inaudible] 10 MR. HAWES: So we'll lose our quorum at 11 12:30. I'm not sure that we could get the whole thing 12 in between now and 12:30 starting at 10:30 or starting 13 now, for that matter. It's undetermined. 14 COMMISSIONER: I don't know who schedules 15 the court reporter. I don't know where the slip 16 occurred. I'm not pointing fingers at anybody, but I 17 am not prepared to go forward unless we have a record 18 that is consistent with the record that we have made 19 here before. 20 MR. HAWES: Further discussion? Any further 21 thoughts? Is 10:30 -- that's a suggestion. 22 We do have a question on the table, however, 23 so we can vote on that question. I'm going to call 24 the question right now. 25 The motion was to proceed with audio (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 12 1 recording and then transcribe from that at such time 2 as the court reporter can do so -- or at such time 3 that that transcription can be made. 4 COMMISSIONER: One other question. 5 MR. HAWES: Uh-huh. 6 COMMISSIONER: Any indication of how long 7 would we need today? [Inaudible] 8 MR. HAWES: Ms. Stump, do you have any idea 9 how long -- 10 MS. STUMP: Depends on how many questions 11 everyone has. I mean, I think I was originally 12 thinking we would be done by lunchtime, but I still 13 think that's a possibility, certainly. And if we, I 14 think, regardless whether we start now or whether we 15 start at 10:30, I think it's important for everyone 16 involved to respect that we may lose a quorum at 12:30 17 regardless, too. 18 COMMISSIONER: Lisa, do you have any opinion 19 or legal guidance for the Rate Commission as to 20 whether this system of recording will be adequate and 21 will meet the requirements of our own rules? 22 MS. STUMP: I think it will. It says the 23 rules say -- it's actually the procedural schedule -- 24 requires that they have the technical conferences be 25 held on the record. That has been interpreted as (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 13 1 having a court reporter. 2 I think there's a question as to whether 3 that even necessarily requires a court reporter. But 4 I mean, that's the way it's been interpreted. So I 5 think, certainly, when you -- if the Rate Commission 6 proceeds and votes to starts with audio, the Rate 7 Commission has the authority to waive the requirements 8 of their procedural schedule even if a court reporter 9 is technically required. 10 I do feel like listening to that audio that 11 a court reporter could pick up -- I think it's going 12 to be important, and I -- if we proceed with just the 13 audio, I would like the Chair to allow me some 14 discretion to enforce the fact that everyone is 15 speaking into a microphone so that we do have a good 16 recording. 17 COMMISSIONER: I just -- I just -- 18 Mr. Chairman, I just don't want to have the 19 proceedings of the Commission be subject to challenge 20 later on, and so that's why I'm looking for the 21 guidance of Counsel. 22 If you're telling us you're not concerned 23 with that and we can proceed and we meet our 24 procedural requirements, then that's important to me. 25 MS. STUMP: I am. Because it's not the (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 14 1 Charter or anything that requires them to have the 2 court reporter. It's our procedural schedule which 3 requires them to be on the record which would be 4 subject to interpretation what that is anyway. 5 But I do think it's important to try to be 6 consistent, but we're really talking before -- once we 7 get through a lot of the procedural happenings of this 8 morning, hopefully, the court reporter will be shortly 9 in time for still the first witness, but I don't have 10 a legal concern with it, should you vote to do so. 11 MR. HAWES: I might suggest the 12 redistribution of microphones. I see an unused mic 13 down there and people without mics in front of them. 14 MS. STUMP: Right. 15 MR. HAWES: So that would probably be a 16 consideration. 17 COMMISSIONER: Can I ask a question? If we 18 lose a quorum at some point at 12, 12:30 today and we 19 still have witnesses, what happens? 20 MR. HAWES: We cannot vote at that point. 21 MS. STUMP: I think we would still proceed 22 with the technical conference because the whole idea 23 is, too, that the other Rate Commissioners who aren't 24 will have an opportunity to review the transcript. 25 I do want -- to your question, (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 15 1 Commissioner Goss, Brian just pointed out to me that 2 actual -- in court proceedings, the court rules allow 3 the reporter to do a transcript from recorded -- from 4 proceedings that were recorded by means of an 5 electronic sound recording. So in actual court 6 proceedings, that's allowed so that would be 7 consistent with what we were doing here this morning. 8 MR. GOSS: Thank you. 9 MR. HAWES: All right. I'm going to call 10 for a vote. 11 (There was simultaneous speaking.) 12 MR. HAWES: Okay. Everybody's got a mic in 13 front of them now? We're all good. Okay. 14 We will call for the vote. All those in 15 favor, aye? 16 COMMISSIONER: Aye. 17 COMMISSIONER: Aye. 18 COMMISSIONER: Aye. 19 COMMISSIONER: Aye. 20 MR. HAWES: All opposed? 21 COMMISSIONER: Aye. 22 COMMISSIONER: Aye. 23 COMMISSIONER: Roll call, Mr. Chairman. 24 MR. HAWES: We can roll call it. 25 MS. STUMP: Mr. Stein? (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 16 1 MR. STEIN: Mr. Beckmann? 2 MR. BECKMANN: Aye. 3 MR. STEIN: Mr. Brockmann? 4 MR. BROCKMANN: No. 5 MR. STEIN: Ms. Croyle? 6 MS. CROYLE: Aye. 7 MR. STEIN: Mr. Goss? 8 MR. GOSS: Aye. 9 MR. STEIN: Mr. Hawes? 10 MR. HAWES: Aye. 11 MR. STEIN: Mr. Mahanta? 12 MR. MAHANTA: Aye. 13 MR. STEIN: Mr. Mahfood? 14 MR. MAHFOOD: Aye. 15 MR. STEIN: Mr. Palans? 16 MR. PALANS: No. 17 MR. STEIN: Mr. Stein is the yea. Have 18 seven yeas. 19 MR. HAWES: Thank you. The motion passes. 20 MS. STUMP: Correct. 21 MR. HAWES: "The Charter Plan of the 22 District" -- we'll move to the technical conference 23 for surrebuttal. 24 "Charter Plan of the District was approved 25 by the voters of St. Louis and St. Louis County at a (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 17 1 special election on February 9, 1954, and amended at a 2 general election on November 7, 2000. The amendment 3 of the Charter Plan established the Rate Commission to 4 review and make recommendations to the District 5 regarding changes in wastewater rates, stormwater 6 rates, and rates proposed by the District. 7 "The Charter Plan requires the Board of 8 Trustees of the District to select organizations to 9 name delegates to the Rate Commission to ensure a fair 10 representation of all users of the District's 11 services. The Rate Commission representative 12 organizations are to represent commercial-industrial 13 users, residential users, and other organizations 14 interested in the operation of the District, including 15 organizations focusing on environmental issues, labor 16 issues, socioeconomic issues, community-related 17 organizations and other nonprofit organizations. 18 "The Rate Commission currently consists of 19 representatives of the Associated General Contractors 20 of St. Louis, St. Louis County Municipal League, 21 Lutheran Senior Services, St. Louis Council of 22 Construction Consumers, Greater St. Louis Labor 23 Council, Missouri Botanical Garden, League of Women 24 Voters of Metro St. Louis, Home Builders Association, 25 Mound City Bar Association, North County Incorporated, (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 18 1 Missouri Coalition for the Environment, the City of 2 Ladue, Engineers Club of St. Louis, Missouri 3 Industrial Energy Consumers, and Education Plus. 4 "Upon receipt of a Rate Change Notice from 5 the District, the Rate Commission is to recommend the 6 Board of Trustees changes in wastewater, stormwater, 7 or tax rate necessary to pay interest and principal 8 falling due on bonds issued to finance assets of the 9 District; the costs of operation and maintenance; and 10 such amounts as may be required to cover emergencies 11 and anticipated delinquencies. 12 "Further, any change in a rate recommended 13 to the Board of Trustees by the Rate Commission is to 14 be accompanied by a statement that the proposed rate 15 change is consistent with constitutional, statutory, 16 or common law as amended from time to time; enhances 17 the District's ability to provide adequate sewer and 18 drainage systems and facilities or related services; 19 is consistent with and not in violation of any 20 covenant or provision relating to any outstanding 21 bonds or indebtedness of the District; does not impair 22 the ability of the District to comply with applicable 23 Federal or State laws and regulations as amended from 24 time to time; and imposes a fair and reasonable burden 25 on all classes of ratepayers. (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 19 1 "The Rate Commission receives -- received a 2 Rate Change Notice from the District on February 26, 3 2018. Under procedural rules adopted by the Rate 4 Commission, any person affected by the Rate Change 5 Proposal had an opportunity to submit an application 6 to intervene in these proceedings. An application to 7 intervene has been filed under the Missouri Industrial 8 Energy Consumers. This application has been deemed 9 granted. 10 "The Rate Commission originally had until 11 June 26, 2018, to issue its report on the proposed 12 Rate Change Notice to the Board of Trustees of the 13 District. The Rate Commission requested an additional 14 45 days to issue its report, and on May 1, 2018, the 15 District Board of Trustees granted the Rate 16 Commission's request. The Rate Commission now issues 17 its report on or before August 18 -- August 10, 2018 18 [as read]. 19 "On February 26, 2018, the District 20 submitted to the Rate Commission prepared direct 21 testimony of Brian L. Hoelscher, Susan M. Myers, 22 Richard L. Unverferth, Marion M. Gee, Thomas A. 23 Beckley, and Henrietta Locklear. 24 "On March 12, 2018, The Rate Commission 25 submitted its first discovery request of the District. (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 20 1 On March 22, 2018, the District files its responses. 2 On March 19, 2018, the Rate Commission submitted its 3 second discovery request to the District, to which the 4 District responded on March 29, 2018. 5 "On April 4, 2018, a Technical Conference 6 was held on the record regarding the Rate Setting 7 Documents and the direct testimony filed with the Rate 8 Commission by the District. The purpose of the 9 Technical Conference was to provide the District an 10 opportunity to answer questions propounded by members 11 of the Rate Commission; then by any Intervener; and 12 finally by Lashly & Baer, Legal Counsel to the Rate 13 Commission. 14 "On April 10, 2018, the Rate Commission 15 submitted its third discovery request to the District, 16 to which the District responded on April 20, 2018. On 17 April 18, 2018, Intervenor Missouri Industrial Energy 18 Consumers submitted its first discovery request to the 19 District, to which the District responded on April 27, 20 2018. 21 "On May 2, 2018, the Rate Commission 22 Consultant and Intervenor Missouri Industrial Energy 23 Consumers submitted rebuttal testimony. 24 "On May 17, 2018, a Technical Conference was 25 held on the record regarding the rebuttal testimony by (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 21 1 the Intervenor and the Rate Consultants. 2 "On May 20, 2018, Intervener Missouri 3 Industrial Energy Consumers submitted its second 4 discovery request to the Rate Commission, to which the 5 Rate Commission responded on May 30, 2018. 6 "On May 21, 2018, the Rate Commission 7 submitted its fourth discovery request to the 8 District, to which the District responded on May 31, 9 2018. 10 "The Technical Conference will be held on 11 the record regarding the surrebuttal testimony of 12 representatives of the District. Each person 13 submitting surrebuttal testimony shall answer 14 questions propounded by members of the Rate 15 Commission, the Intervenor, and finally by our Legal 16 Counsel. 17 "Ratepayers who do not wish to intervene 18 will be permitted to participate in a series of 19 on-the-record public hearing sessions which begin on 20 May 8, 2018. 21 "Who is here on behalf of the Metropolitan 22 St. Louis Sewer District?" 23 MS. MYERS: Susan Myers. 24 MR. HAWES: "Who is here on behalf of the 25 Missouri Industrial Energy Consumers?" (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 22 1 MR. NEUSCHAFER: Brandon Neuschafer. 2 MR. HAWES: "All present are Pamela Lemoine 3 of Black & Veatch, consultant to the Rate Commission; 4 Nicole Young of Lion CSG; and Lisa Stump and Brian 5 Malone of Lashly & Baer, Legal Counsel to the Rate 6 Commission. 7 "Under the Rate Commission's Operational 8 Rules, no person shall be required to answer questions 9 for a total period of more than three hours, and the 10 time shall be divided among all of the participants 11 desiring to ask questions. Following questions by 12 members of the Rate Commission, I will attempt to 13 allocate the time equally among the participants and 14 our legal counsel. 15 "To the extent that the District, the 16 Intervener, or Legal Counsel has not completed the 17 questions at the expiration of that person's allotted 18 time, and to the extent the time remains, such person 19 will be permitted to propound additional questions 20 until the three hours has expired." 21 "Are there any procedural matters?" 22 MS. STUMP: Mr. Chair? I just do want to 23 make a comment procedurally. Ms. Myers has requested 24 that the witnesses testify in an order different than 25 their testimony was submitted. Specifically, she (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 23 1 would like for Mr. Hoelscher to go first, then 2 Mr. Unverferth and then Ms. Locklear and then Mr. Gee, 3 based on just the issues that are being discussed. 4 And I indicated that I did not object to 5 that as long as she would continue to make those 6 witnesses available should, for instance, a 7 commissioner have a question of Mr. Hoelscher after 8 talking to Mr. Gee, for instance. 9 MR. HAWES: Very good. Thank you, 10 Ms. Stump. 11 Are there any questions from the -- or 12 concerns from the Rate Commission regarding that 13 procedural matter? 14 Okay. We are fine with that. All right. 15 Then we are ready to begin the proceedings. 16 Ms. Myers, do you -- please -- sorry. 17 "If there are no further procedural matters, 18 Ms. Myers, are you ready to present those persons for 19 whom you filed surrebuttal testimony on behalf of the 20 District?" 21 MS. MYERS: Yes, we are. 22 MR. HAWES: Please proceed. 23 * * * * * 24 BRIAN HOELSCHER, 25 having been duly sworn, testifies as follows: (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 24 1 * * * 2 MR. HAWES: Ms. Myers, please proceed. 3 MS. MYERS: He's available for questions -- 4 MR. HAWES: Okay. All right. Very good. 5 MS. MYERS: -- regarding his surrebuttal 6 testimony. 7 MR. HAWES: All right. Does any member of 8 the Rate Commission have questions for Mr. Hoelscher? 9 Mr. Palans. 10 MR. PALANS: Thank you, Mr. Chairman. 11 EXAMINATION 12 BY MR. PALANS 13 Q. Mr. Hoelscher, we're here today because both 14 the District and our Commission, Rate Commission, 15 share a common goal, and that goal is to remediate or 16 fix the flooding and erosion problems within our 17 district. I would like to talk to you a little bit 18 today about where we've been, where we are, and where 19 we're going, and set the stage of where we are on the 20 record, as I understand it, and confirm my 21 understanding. 22 I would like, first, to talk about the size 23 and the scope of the capital projects that we're 24 trying to fix or remediate. The Stormwater Rate 25 Proposal identifies 483 projects to address flooding Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 25 1 and erosion issues within the district at a proposed 2 cost of $562 million. 3 Assuming approval of the Stormwater Rate 4 Proposal with $30 million per year revenue, the record 5 is that it would take at least 30 years to remediate 6 the 483 scheduled projects. Is that your 7 understanding? 8 A. Close. I would call it 483 issues that 9 we've identified with a cost. I wouldn't call them 10 all projects. There are issues that have been 11 reported to us. 12 Q. Is it your testimony that it will take 13 approximately 30 years to address these 483 issues? 14 A. I think -- yes. I think I said that's a 15 good estimate, yes. 16 Q. And the testimony is that the $562 million 17 CIRP budget for capital projects is, in the quoted 18 words, "conceptual in nature"; correct? 19 A. Yes. 20 Q. And it's in fiscal 2018 dollars; correct? 21 A. Correct. 22 Q. It's not in 2048 dollars. It's 2018 23 dollars. 24 A. Correct. 25 Q. And the proposal is based upon a record that Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 26 1 reflects a minimal amount of detailed information 2 regarding geotechnical conditions, utility relocation 3 requirements, easement requirements, and other 4 site-specific issues that have the potential to 5 significantly affect the project's eventual 6 construction cost; is that correct? 7 A. That's correct. 8 Q. Mr. Unverferth previously testified that 9 these $562 million CIRP budgeted projects represent 10 conceptual costs based upon a "minimal amount of 11 detailed information," and were "formulated without 12 doing much engineering." 13 And I'm relying upon Mr. Unverferth's 14 testimony at the Technical Conference on April 4, 15 2018. Is that your understanding, also? 16 A. Yes. 17 Q. In fact, your prior testimony at that 18 hearing was that the $562 million capital improvement 19 costs represents, "Taking every issue that was out 20 there and doing a very quick analysis"; correct? 21 A. Correct. 22 Q. Rough estimates is the word you used to 23 describe it; is that right? 24 A. Yes. 25 Q. And you also said that engineering may be Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 27 1 spent a few minutes looking at each project; correct? 2 A. Correct. 3 Q. These conceptual costs do not include 4 easement acquisition costs, do they not? 5 A. I believe the conceptual costs are supposed 6 to estimate all total project costs including 7 easements. 8 Q. Just bear with me just a second. 9 A. I don't believe there's an individual line 10 item for that, but the conceptual cost with the 11 contingencies is supposed to be reflective of the 12 total cost of the program as best as we can guess. 13 Q. Your testimony on page 109 of MSD Exhibit 36 14 in response to a question, the District talks about 15 conceptual and preliminary design costs do not take 16 into consideration easement acquisition costs. 17 Your response, "No. What we do is, once we 18 program a project, we take a look at -- we estimate 19 how many easements we may need for all the projects 20 identified throughout a current fiscal year and then 21 we put a dollar amount on that and put that within 22 that particular year. In other words, a conceptual 23 cost at that time do not include easement acquisition 24 costs." 25 Was that your testimony? Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 28 1 A. When did I make that test- -- it sounds like 2 something Mr. Unverferth responded to. I -- is that 3 my testimony? 4 Q. Yes, sir. 5 A. That would be correct for the detail 6 estimate at the time that we're doing the project and 7 we're pricing the rate of [inaudible] required 8 easements. The general conceptual estimates for 9 projects that are 25 years out, there's a contingency 10 built into them for things we can't identify. My 11 understanding is easement costs would be in there, as 12 best we could tell at the time. 13 Q. And also in MSD's response to the 14 Commission's third discovery request, MSD Exhibit 37-A 15 states: "The 562 million conceptual estimate would 16 increase in cost due to inflation." 17 Is that your understanding? 18 A. For inflation it could cause an increase in 19 cost, yes. 20 Q. And inflation means that the cost of 21 materials, the cost of engineering, and the cost of 22 labor would likely increase as the cost of these 23 483 CIRP projects occur over the 30-year period; 24 right? 25 A. So yes. You would see an increase if your Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 29 1 sole point of consideration is inflation, yes. 2 Q. And also affecting that -- affecting these 3 483 CIRP projects could be additional erosion; 4 correct? 5 A. There's a lot of things. Additional erosion 6 projects also can "cost of program will very likely go 7 down." Prior to cleaning or -- cleaning up and 8 reevaluating the outstanding stormwater projects, I 9 think, is part of the 2008 impervious area. We had an 10 estimate of a billion dollars in stormwater projects 11 at the time. We've reevaluated and got knocked down 12 to the current 562. 13 So it can go up; it can go down. It's a 14 very flexible number. There's a lot of other things 15 other than just inflation that can impact what the 16 total need as perceived by our residence would be in 17 the future. 18 Q. Well, we identified erosion as affecting the 19 cost -- could -- it could affect the cost increase; 20 correct? 21 A. Correct. As well as -- as well as 22 development which may -- outside of MSD's program 23 which may make the problem go away and result in no 24 cost to MSD. 25 Q. And additional flooding could affect the Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 30 1 cost; correct? 2 A. And redevelopment can then lower the cost; 3 correct. It can go up or down for any of these. 4 Q. And the deterioration of a project over the 5 years could affect the cost; correct? 6 A. Correct. 7 Q. And you mentioned any new or additional 8 developments or construction projects affecting 9 certain properties may adversely impact the cost 10 associated with those projects? 11 A. Or inadvertently and actually reduce the 12 cost. 13 Q. You previously testified, and I believe the 14 record reflects, that these projects, these 483 CIRP 15 projects are based upon stormwater complaints received 16 by the District; correct? 17 A. Correct. 18 Q. And, in fact, Mr. Unverferth's surrebuttal 19 testimony today, which is MSD 56, in Question 1, lines 20 8 through 10, Mr. Unverferth states that "MSD receives 21 'hundreds of calls annually from MSD customers 22 requesting assistance in dealing with flooding and 23 erosion issues. There's a public expectation that MSD 24 respond to these issues.'" 25 Correct? Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 31 1 A. Correct. 2 Q. And as for the amount of the proposed 3 stormwater rate requested, Mr. Unverferth testified 4 previously that this Stormwater Rate Proposal is based 5 upon what "MSD believes its customers will pay in lieu 6 of addressing a more detailed study to size the scope 7 of the problem." 8 Do you remember that testimony? 9 A. Yes. 10 Q. Do you agree with it? 11 A. So I think what Rich was trying to convey is 12 that for us to do a more detailed analysis of what 13 people feel exist today would require the expenditure 14 of funds that don't currently exist. So -- so I -- 15 can you repeat the statement? I don't have it in 16 front of me. 17 Q. The statement in the record is, quote, MSD 18 believes its customers will pay -- I'm sorry. Strike 19 that. 20 Mr. Unverferth testified that this 21 Stormwater Rate Proposal is based upon what "MSD 22 believes its customers will pay in lieu of addressing 23 a more detailed study to size the scope of the 24 problem." 25 A. So I think the first part of Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 32 1 Mr. Unverferth's statement is really, really 2 important. This whole discussion becomes somewhat 3 moot if we don't get any positive vote for a rate. So 4 I think that was the issue that Mr. Unverferth was 5 conveying, that that is just as much of an important 6 part of what the size of the program would be as to 7 what we believe the current backlog and data is of the 8 issues that we think we may address in the future. 9 Q. And in fact, no detailed study of these 10 issues, these 483 issues was made, was it? 11 A. For this program, as I think has been 12 testified in both District experts and the Rate 13 Commission's experts for a program this size, it would 14 be not prudent and not a good use of the ratepayers' 15 moneys to do detailed analysis and detailed projects 16 for -- analysis for projects that are that far out in 17 the future. 18 Q. I didn't ask you whether it would be prudent 19 or not. I'm merely asking you if this was not based 20 on detailed study? 21 A. Right. And I believe I answered the 22 question the way I wished to. 23 Q. Okay. Very good. In terms of a detailed 24 study, I would like to share with you some information 25 that we learned in my municipality. Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 33 1 We performed a detailed study in stormwater 2 remediation and erosion and we engaged in an 3 engineering firm, the HR Green professional 4 engineering firm which performed a stormwater 5 assessment within our municipality, and the result of 6 that study identified 55 remediation projects having a 7 remediation cost of $113 million. That was a detailed 8 study. 9 Are you aware of the study that was 10 performed within my municipality? 11 A. If your municipality shared those results 12 with us, which I think the City of Ladue does, yes, we 13 would be aware of them. 14 Q. So just comparing my little municipality's 15 study on stormwater assessment, our study identified 16 55 sites whereas the District has identified 17 483 projects. Our municipality sized those 18 55 projects, and it cost them $113 million. And the 19 District has sized this project within the entire 20 district at $562 million. 21 So my little municipality identified about 22 2 percent of the number of projects that the District 23 identified and our cost to remediate those projects is 24 about 20 percent of what the District identified to 25 remediate within a 520-square mile area. Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 34 1 So let me go back, if I might, and ask you. 2 If a detailed study were performed on these 3 483 projects, do you think that detailed study would 4 size this problem much larger than the $562 million 5 currently under conceptual estimate? 6 A. It could be it is larger, or it could be 7 smaller. I would caution not knowing the exact 8 details of Ladue study based on our experience with 9 other municipalities. There are municipalities who 10 look to solve stormwater problems and wouldn't 11 necessarily either fall under the priority or the 12 purview of MSD. I'm just going on past experience 13 where MSD projects get added into other stormwater 14 concerns when the municipality feels it important to 15 them. 16 So without knowing the details of Ladue's 17 program, which I'm not privy to, I just can't imagine 18 the idea of scaling up Ladue's program to be 19 representative of MSDs. I just don't know that that 20 would be appropriate to do. 21 Q. I'm not trying to scale up Ladue's program 22 to MSD's. I'm merely pointing out that when a 23 detailed assessment was made, the actual costs are far 24 in excess of the project per dollar amount that the 25 District has identified? Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 35 1 A. And I understand that that's what Ladue 2 would tell you in MSD's case when it comes to actual 3 execution of projects. Projects can also go down in 4 cost, or they can disappear by the time we're ready to 5 do detailed work. It happens both ways throughout the 6 district boundaries. 7 Q. I would like to ask you, based upon our 8 record and what we have and all these factors that 9 we've talked about with regard to reliability and the 10 sizing and scope of the problems within the district 11 and the conceptual costs, the minimal amount of 12 detailed information, formulated without doing much 13 engineering, rough estimates, and I'm using words in 14 the record to identify them. 15 Made without regard to impact on 16 inflationary costs for materials, labor, engineering, 17 being performed over the next 30-year period, while 18 the District is receiving hundreds of complaints from 19 customers annually. A rate proposal based on what the 20 District believes the public would support in lieu of 21 a detailed study to size the scope of the problems. 22 Further erosion and flooding and deterioration over 23 the next 30 years which may materially increase and 24 adversely impact the size and scope of these projects. 25 I would like to ask, in your opinion, the Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 36 1 CEO of this district, how reliable is the likelihood 2 that THIS $562 million sizing will remediate or fix 3 all flooding and erosion problems within the district 4 today or over the next 30-year? 5 A. There's a chance that it will. Again, as we 6 expressed -- and one I would take issue with, I think 7 you were quoting or stating as a fact that asking the 8 public to pay for this in lieu of a detailed study. 9 That isn't the District's intent. I believe there was 10 a statement like that. 11 I believe that -- emphatically believe that 12 the size of the program that we're proposing, knowing 13 the scope and breadth of the potential issues and the 14 scope and breadth of the severity of the potential 15 issues and what MSD is proposing, is absolutely the 16 right proposal to put in front of the voters in order 17 to start addressing this issue on day one. 18 Q. I'm not disputing what you believe is the 19 right thing to put in front of the voters. My 20 question was -- and I think you answered it -- that 21 there's a chance that the $562 million based upon the 22 conceptual nature, lack of detail study, all the 23 plethora of all of these factors, there's a chance 24 that the $562 million will remediate all the 25 stormwater problems in the district. Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 37 1 A. There's a chance it will; there's a chance 2 it won't. The same as Ladue's program. There's a 3 chance the dollars you identified may address all the 4 problems. There's a chance the dollars you identified 5 will not. I think that's the nature of the stormwater 6 program. 7 Q. You are a betting man. Would you put your 8 money on the bet that it will solve the problem? 9 A. I am a betting man, and this isn't something 10 to bet on. It's too important to the ratepayers. I 11 think it's important we give them the opportunity to 12 decide to address this -- whether or not to address 13 this in a way they find affordable and that makes 14 sense so we can start relieving the issues that folks 15 are bearing with with regard to stormwater issues. 16 Q. Mr. Hoelscher, I don't disagree with you. I 17 think we need -- I think we need support of a program. 18 My question is the sizing and scope of the problem. 19 If 500 -- I want to know, will $562 million 20 fix the problem? And I haven't heard in confidence 21 that it will. 22 A. So my answer was, it may or may not when we 23 did -- and I'll go back to the impervious rate as an 24 example. In 2008, we thought there were a billion 25 dollars' worth of problems based on current data we Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 38 1 have. Stormwater moves. It moves district-wide. It 2 moves for a lot of the reasons you stated. It moves 3 for a lot of other reasons, in that things get taken 4 care of outside of MSD's activities. 5 Do we feel that that's an appropriate amount 6 to offer to allow the voters to vote on that will 7 address these problems at a reasonable rate based on 8 everything we know? Yes, I do. 9 Q. I would like to talk to you about the 10 prioritization of projects. It's been a subject of 11 discussion that we've had in the past. And I believe 12 that the 483 CIRP stormwater projects were identified 13 in MSD Exhibit 41-F. 14 As we understand from the testimony and 15 documents that have been produced, these capital 16 projects are prioritized based upon cost benefit 17 rating system; is that correct? 18 A. Yes. 19 Q. And the rationale for that rating system is 20 that the higher priority projects are scheduled sooner 21 in the project than lower priority projects; correct? 22 A. That's the purpose of the prioritization 23 system, yes. 24 Q. And the District, as I understand, typically 25 prepares a rolling five-year block of projects for Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 39 1 completion, and it updates that annually; correct? 2 A. Correct. 3 Q. And as I understand the record, you -- and I 4 mean you, the District -- you look at a problem and 5 you take into account the severity of the problem, how 6 often it occurs, whether it's flooding to a home, a 7 structure, or a roadway. If so, it gets more points 8 under the system than if it's merely some water 9 sitting in somebody's yard; is that correct? 10 A. All those instances you indicated have a 11 different benefit value, yes. 12 Q. And I personally like to call this 13 prioritization system the scorecard. So the scorecard 14 in my -- do you use that term internally "MSD 15 scorecard" at all? 16 A. We can in the future. I am -- it's a 17 perfectly acceptable method -- 18 Q. Okay. 19 A. -- of terminology. 20 Q. Okay. And the District's factors comprising 21 the scorecard or scoring system which forms the basis 22 for that scorecard has been written and reviewed over 23 the years by experts, and that's as indicated in MSD 24 response to the fourth discovery request of the 25 Commission; is that correct? Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 40 1 A. Yes. 2 Q. And this prioritization system was upgraded 3 by MSD and Parsons. Who's Parsons? 4 A. Parsons Water & Infrastructure, a large 5 national consultant firm. 6 Q. So it was upgraded by MSD and Parsons in 7 2006, as I understand, to reflect the various problem 8 categories; correct? 9 A. If that's what the, again, if that's what 10 the answer was in the discovery request, then yes. 11 Q. And the prioritization system as described 12 in MSD 30-J and 30-K -- and that's a prioritization 13 schedule that you provided -- was established as part 14 of the 2010 report, and it's a system you currently 15 use; correct? 16 A. Yeah. I believe so. And if that was our 17 answer, then yes, that's correct. 18 Q. And you agree as stated in the District's 19 position as set forth in the response to the current 20 discovery request from the Commission -- it's 21 Interrogatory 12 or Request No. 12 -- that the 22 prioritization system or scorecard used for these 23 capital projects and prioritizing these projects is 24 fair and equitable; correct? 25 A. Yes. Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 41 1 Q. Because it's a written procedure 2 consistently implemented; correct? 3 A. Correct. 4 Q. And it's intended to provide the greatest 5 benefit for the court -- greatest benefit for the 6 cost; correct? 7 A. Correct. 8 Q. And it was developed by qualified experts in 9 the field of stormwater engineering and consistent 10 with industry practice; correct? 11 A. Correct. 12 Q. So in your opinion is this prioritization 13 system fair? 14 A. Yes. 15 Q. Is it defensible? 16 A. Yes. 17 Q. Is it objective? 18 A. Yes. 19 Q. Does it work? 20 A. Yes. And it has worked for those areas that 21 we've been working on these type of projects within 22 those areas where we were collecting taxes to do these 23 projects. 24 Q. We've talked about where we've been and 25 where we are with respect to the adequacy of assessing Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 42 1 size and scope or prioritization. Now I would like to 2 talk about where we're going. 3 We said at the outset that we're all here 4 because we share a common goal, and that is to fix or 5 remediate all the floodings and erosion problems 6 within the district. And we want to fix or remediate 7 these problems within the district as soon as 8 possible. Do you agree that that's why we're here 9 today? 10 A. As soon as -- I want to alleviate them as -- 11 in as quick of a manner as the public decides is 12 appropriate -- that is appropriate to spend on that 13 particular program. 14 Q. So we have 483 capital projects, and they 15 have been prioritized under the MSD scorecard with 16 budgeted costs aggregating $562 million; correct? 17 A. We've identified issues of that amount, yes. 18 Q. And the timeline to remediate all these 19 projects is approximately 30 years; correct? 20 A. Just with a quick simple math calculation, 21 yes. 22 Q. With a proposed stormwater rate, which if 23 approved, will generate $30 million revenue each year; 24 correct? 25 A. Yes. Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 43 1 Q. With regard to the source of funds, there 2 are no external borrowings; right? 3 A. Correct. 4 Q. There's no third-party funding; right? 5 A. There may be, on occasion, we have 6 third-party funding that comes in. That's possible 7 it'll provide additional funds to pursue the programs. 8 There are occasions where that occurs. 9 Q. And Mr. Unverferth previously testified -- 10 and I quote him -- and this is in reference to 11 MSD Exhibit 36, the April 4 transcript. "This lack of 12 funding to address stormwater remediation has been 13 around a long time. Some projects have been here over 14 30 years." 15 Do you recall that testimony? 16 A. Yes. 17 Q. Given the lack of funding and the District's 18 limited resources to address the stormwater 19 remediation needs, do you believe it would be a good 20 policy decision on the part of the District to 21 encourage third-party funds to contribute to the 22 remediation problem? 23 A. Yes. 24 Q. If third-party funds were encouraged to be 25 invested in stormwater capital projects, affected Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 44 1 projects could be completed faster; correct? 2 A. More projects could be done in a given year. 3 I guess that means faster. Yes. 4 Q. And the use of third-party funds would 5 encourage third-party partners within the district to 6 help us remediate our stormwater problems, would they 7 not? 8 A. Yes. I assume it would, yes. 9 Q. And the use of third-party funds could 10 supplement the available resources that the District 11 has; correct? 12 A. Well, I would take your term of "teaming" 13 being they could also solve the problems at the same 14 time that MSD is solving the problems invariably, 15 except in rare instances, outside sources of funding 16 have a different priority system, different set of 17 standards by which they want to have their money 18 spent. 19 So I think anything we can do to team 20 together and make sure those are done at the same time 21 to solve those problems quicker would be better. 22 Q. In your surrebuttal testimony today in your 23 very first answer you state: "The MSD Charter, 24 Exhibit MSD 4, provides broad powers to the District 25 to ensure, 'adequate stormwater drainage throughout Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 45 1 the district.'" 2 Do you agree that's your testimony? 3 A. Yes, sir. 4 Q. And you cite Article 3, Section 3.020(1) of 5 the Charter for this position; correct? 6 A. Correct. 7 Q. And we agree that we don't have adequate 8 stormwater drainage throughout the district today. 9 That's why we're here; correct? 10 A. Correct. 11 Q. In your second answer in MSD No. 54, your 12 surrebuttal, you go on to reference Article 3 of the 13 Charter, Section 3.020(2) which empowers the District 14 to "Provide an effective and advantageous means for 15 ensuring within the district with adequate stormwater 16 drainage and to take, 'any and all such steps as the 17 Board may deem necessary and proper to effect the 18 purposes hereof.'" 19 Is that correct? 20 A. Correct. 21 (The following was transcribed from the 22 live proceedings.) 23 Q. (By Mr. Palans) With respect to third-party 24 funding and your response to Question 3 of your 25 surrebuttal, you state: "In an effort to be fair and Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 46 1 reasonable to all classes of ratepayers, MSD has 2 always been receptive to teaming with other entities 3 in the full or partial outside funding of stormwater 4 projects." 5 Right? 6 A. Correct. 7 Q. And these individuals, other entities the 8 District might team with, would include individuals; 9 yes? 10 A. Yes. 11 Q. Municipalities; yes? 12 A. Yes. 13 Q. Homeowner associations; yes? 14 A. Yes. 15 Q. Nonprofits; yes? 16 A. Yes. 17 Q. As well as public or private companies; 18 correct? 19 A. Correct. 20 Q. And all of these entities should be 21 encouraged to remediate, assist the District in 22 contributing funds to address our problems; correct? 23 A. They should be encouraged to team with the 24 District so that the expenditure of the dollars by any 25 of these entities can make things go faster and get Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 47 1 things completed. 2 Q. You go on to state in Question 3 response: 3 "In calculating the cost of a project and determining 4 the benefit cost ratio, cost shall always be the cost 5 to complete the project regardless of the source of 6 funding." 7 And that's your testimony; correct? 8 A. Yes, sir. 9 Q. I would like to explore that a little bit 10 with you. In the Rate Commission's fourth discovery 11 request to the District which was MSD 50(a). The Rate 12 Commission asked you to "Explain how the contribution 13 of private funding would affect a project score in the 14 District's prioritization system. 15 "For example, if a project score projects a 16 cost to the District of $15 million and a third month 17 party proposed to provide $10 million to reduce the 18 District's cost to $5 million, how would the project's 19 priority be affected?" 20 And your response was: "See rebuttal of 21 Brian L. Hoelscher, Exhibit 54." 22 Right? 23 A. I don't have it in front of me, but I trust 24 that you're reading it properly. 25 Q. And your surrebuttal that I referenced a Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 48 1 moment ago was that: "Priority for completion of a 2 project 'shall always be the cost to complete the 3 project regardless of the source of funding.'" 4 Correct? 5 A. Correct. 6 Q. And you go on to explain: "This process 7 ensures that the value of the stormwater capital 8 dollars from all ratepayers will be weighed equally 9 and not be influenced by the ability of a third-party 10 source to provide additional funding to the process." 11 Is that your testimony? 12 A. Yes, sir. 13 Q. We've talked a lot today about how the 14 District prioritizes these 483 capital budgeted 15 stormwater projects, and you testified and confirmed 16 that the MSD prioritization system or scorecard that 17 you use is fair and equitable; that it's intended to 18 provide the greatest benefit for the cost that it was 19 developed by experts in the field of stormwater 20 engineering; and that it's consistent with industry 21 practice; correct? 22 A. Yes. 23 Q. So we have a measure that everybody believes 24 to be fair, objective, and feasible; right? 25 A. Correct. Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 49 1 Q. So help me out here. Let's go back to the 2 example raised in the Rate Commission's discovery 3 request. If a project score projects a cost of the 4 District of $15 million and a third party proposes to 5 provide $10 million to reduce the District's cost on 6 that project to $5 million, the District's costs for 7 that project go down by $10 million; correct? 8 A. The District's costs do, yes. 9 Q. And MSD's cost for that stormwater CapEx are 10 reduced by $10 million for that project; correct? 11 A. It is $10 million the District would not 12 have to spend in the future, assuming that entity 13 would spend their $10 million on a stormwater project 14 whether MSD was involved or not. 15 Q. So for this fiscal year that this project 16 comes on stream -- pardon the pun -- and assuming that 17 the rate proposal has, in fact, been approved, the 18 District has $30 million of revenue dedicated for 19 stormwater remediation; correct? 20 A. Correct. 21 Q. In the example that we just described, the 22 District has $10 million from a third party, be it a 23 nonprofit, a municipality, a business, an individual, 24 to contribute to stormwater remediation; correct? 25 A. Correct. Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 50 1 Q. So now the District has a $40 million 2 availability within that fiscal year to address 3 stormwater needs; right? 4 A. Correct. Assuming that the entity who is 5 providing the $10 million does not tie it to the 6 construction of a very specific project that's not 7 currently prioritized or programmed. 8 Q. Well, I'm assuming that it falls within 9 somewhere -- somewhere in the 483 capital projects 10 that are -- 11 A. So it could be as long as 29 years out then, 12 you're saying? 13 Q. Yes, sir. 14 A. Okay. 15 Q. It could also be as long as two years out, 16 four years out, six years out. It doesn't matter is 17 what I'm saying. 18 A. Well, it does. If it is one year out and if 19 MSD can participate in moving that project up and not 20 change the schedule of other prioritized projects, MSD 21 would participate in the funding, as I think we've 22 described we've done in the past with various 23 municipalities. 24 We will not do something like that if any of 25 the finances would result in us delaying a higher Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 51 1 priority project. 2 Q. Well, let's stay with this for just 3 a minute. Let's say we have a project that is 4 10 years out, and that project that's 10 years out is 5 willing to contribute $10 million and it's a 6 $15 million project cost. And the effect of that 7 $10 million contribution moves that project into the 8 current fiscal year for completion under the scorecard 9 that you believe -- 10 A. Well, under the scorecard the way you want 11 to interpret it. That's not the way MSD interprets 12 it, but if you're saying that reduces the cost in that 13 calculation, then I'll go on that premise. 14 Q. The effect of that contribution would move 15 that project up from 10 years out to the current 16 fiscal year; correct? 17 A. Under your scenario, but not under the way 18 MSD runs its program or under the description of the 19 cost benefit analysis program. 20 Q. I get it. I get it. So in the year that 21 this project has moved up, we have completed a project 22 that was scheduled to be completed 10 years in the 23 future, and the District now has $25 million of funds 24 to address remediation projects for that fiscal year, 25 in addition to the $10 million that was contributed; Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 52 1 right? 2 It's used $5 million plus the 10 for the 3 project that was 10 years out in the future, and it 4 has $25 million yet available to complete fiscal year 5 projects; right? 6 A. So if MSD, in providing that $5 million for 7 somebody to move their lesser priority project 8 10 years up, does not result in us taking five 9 projects worth $1 million with a higher priority and 10 forcing people to live with their stormwater problem 11 for another year, MSD would participate as long as we 12 would not change the program, the priority projects of 13 other customers who were living with much more severe 14 situations with regard to stormwater problems. 15 Q. In the example I gave, the District's costs 16 are reduced by $10 million in that fiscal year; 17 correct? 18 A. No. $10 million 10 years out from now. 19 That's what's -- it's reduced if there's a $10 million 20 contribution. If you're saying -- if you would have 21 indicated this project is currently programmed for 22 10 years from now, so that $10 million would reduce 23 our cost for budgeting 10 years from now, not in the 24 current fiscal year. 25 Q. And you have $25 million available yet in Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 53 1 that fiscal year to address projects; correct? 2 A. $5 million less is what we end up with. 3 Instead of 30, we have 25 million, and that 5 million 4 if it results in us not being able to use that money 5 on projects that were already prioritized for the 6 current year for individuals who are suffering from 7 stormwater issues that are of a higher priority, then 8 we will not contribute the dollars. 9 Q. And the $10 million that I identified that a 10 third party would contribute is -- you're trying to 11 encourage third-party contributions, right, to fix the 12 problem? 13 A. If they're encouraged to do so, yes. It 14 works out to be a very good program. As long as we 15 are not -- and I will use the statement that you used, 16 that you repeated for me. As long as the process 17 ensures that the value of the stormwater account, the 18 dollars from all ratepayers, would rate equally and 19 not influenced by the ability of the third party to 20 provide additional funding to the process, then we 21 will, yes. 22 Q. I'm talking about incentives here. 23 Incentives to encourage third-party contributions. 24 And under your interpretation, I think you have a 25 disincentive. For under your interpretation, what Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 54 1 incentive is there for anybody to contribute funds to 2 fix any stormwater capital projects? 3 A. So the real life example I can give that I'm 4 familiar with is the city of Frontenac. They have -- 5 regularly do projects with us. They understand that 6 in a given fiscal year a design is programmed. In the 7 future fiscal year construction is programmed. They 8 feel they can do things faster. They want to add 9 additional stormwater issues that aren't identified 10 with MSD. They will offer to pay for the design that 11 will give us additional dollars -- actually give us 12 additional dollars in that particular fiscal year and 13 then ask for us to contribute to the construction in 14 the future fiscal year. 15 If you take the current fiscal situation in 16 that year and is saving in those design dollars and 17 other savings or changes that occur because maybe a 18 project didn't go out because of an easement or 19 something, as long as we don't have to change a 20 priority of other entities, then the project can move 21 up as long as we don't have to change the scheduling 22 of higher priority projects. And that is what in real 23 life happens right now. 24 Q. We're -- we disagree. It's really how you 25 interpret cost. Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 55 1 A. No. I think we disagree with the value of 2 what's fair and reasonable for all the ratepayers who 3 are paying into the stormwater. As far as the cost, 4 MSD has -- you do disagree with that, but I don't 5 think that's the issue. I think the issue is being 6 fair and reasonable to all our ratepayers that the 7 dollars they contribute are equal regardless of where 8 we collect in the district. 9 Q. Under our example, if I have a party that is 10 willing to contribute $10 million and I have a party 11 that's willing to contribute $10 million every year 12 for 30 years, that's $300 million potential additional 13 funding available for the District; correct? 14 A. If somebody's willing to contribute us 15 $10 million for us to take care of our stormwater 16 program, we're more than willing to take the money. 17 Q. And what incentive do they have if their 18 project isn't completed? 19 A. I would think that would be up to them. The 20 other option is to use that $10 million to solve the 21 problems which they have the ability to do. 22 Q. Mr. Hoelscher, if you have a voluntary 23 contribution of $10 million, the benefit for that 24 project remains the same in terms of number of 25 projects or properties impacted or benefited; correct? Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 56 1 A. Correct. 2 Q. So in this example, the District's cost are 3 reduced by $10 million while the properties that are 4 benefited remain the same; correct? 5 A. You mean MSD expenditures on the project? 6 Q. Yeah. 7 A. MSD expenditures on that project would go 8 down by 10 million -- 9 Q. I'm using your scorecard, your analysis that 10 you believe to be fair. If I have a voluntary 11 contribution and your costs go down and the benefits 12 remain the same, the scorecards should be readjusted; 13 correct? 14 A. No, no. The bottom cost is the cost for the 15 whole program regardless of outside contributions. 16 And I think we've been clear on that from day one when 17 we -- this question first came up. 18 Q. You have been clear on it, and that's why I 19 disagree, because I'm trying to identify means to 20 encourage resolution of all of the problems in the 21 district. And you can -- we can do it under the same 22 scorecard that you have. 23 A. Well, I think there are much less -- just 24 using your scenario, a much less complicated way of 25 doing this is if an entity has $10 million per year Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 57 1 for stormwater, that entity has every right to do 2 $10 million a year of stormwater work. That's most 3 important to them. And they should do it. Makes 4 perfect sense. 5 I would recommend they coordinate with us to 6 see if there is District funding that comes out 7 through our priority process as fair and reasonable 8 for all the revenues we collect, but if an entity has 9 that much money, do your stormwater projects. Not 10 only does MSD have the right to do this, individual 11 municipalities and counties and other areas have the 12 ability to do this work as well, and I believe they 13 should. 14 I think the benefit -- I think the incentive 15 would be to spend the money to take care of just their 16 constituents. I think that's a pretty big incentive. 17 Q. I don't see any incentive. For somebody to 18 contribute all the money to their own project, we're 19 talking about trying to encourage people to work with 20 MSD to fix the problem. Let me go back to the 21 example. 22 If I had $10 million available and your 23 costs are reduced by $10 million, then the number of 24 properties that are effective remains the same. Then 25 the scorecards should be adjusted to allow that Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 58 1 prioritization. 2 A. Completely disagree in order to be fair and 3 reasonable with the rates paid by all our ratepayers. 4 Q. And would you agree with me that what I have 5 described would encourage third parties to contribute 6 funds to our stormwater projects to allow them to 7 complete these projects? 8 A. Sir, under your scenario, I have no doubt it 9 would encourage them to do it. It would also result 10 in those who don't have the ability to participate in 11 that have their higher priority projects delayed 12 because of the local contribution of MSD would cause 13 those projects to have to be done later because it 14 reduces the amount of MSD funds available for MSD's 15 jobs in any particular fiscal year -- 16 Q. And it would also -- 17 A. -- and would take that as unfair and 18 unreasonable. 19 Q. And it would also allow MSD within that 20 fiscal year to do additional projects that it wasn't 21 already budgeting for that year; correct? 22 A. No. It would require -- it would allow us 23 to do $5 million less of projects we had for that 24 fiscal year because that $5 million is going toward 25 the contribution of a project that was programmed Examination of Brian Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 59 1 10 years from now. 2 So instead of doing $30 million of 3 programmed high-priority projects, we would do this 4 other project that's 10 years out, spend $5 million 5 there. We'd only be left with 25 million to address 6 the $30 million in prioritized projects that's already 7 in our program. 5 million would have to be delayed. 8 We don't find that to be appropriate. 9 Q. Your scorecard should be adjusted annually; 10 right? 11 A. Totally disa- -- yes, it is based on the 12 cost -- if any new data comes on, either benefits or 13 the cost of the project. 14 Q. And new information would also cause you to 15 readjust your priority on your scorecard; correct? 16 A. Correct. 17 Q. And additional funding that allows the 18 number of properties to remain the same while cost go 19 down should also be a factor to adjust your scorecard; 20 correct? 21 A. Disagree. MSD believes it would be not fair 22 and not reasonable to all its ratepayers. 23 Q. You think that's discriminatory, huh? 24 A. Those are your words, sir. 25 Q. Do you believe that's discriminatory? Examination of Mr. Hoelscher By Mr. Brockmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 60 1 A. I believe it's not a fair and reasonable use 2 of all the ratepayers' funds. 3 Q. If we were to adopt a program to encourage 4 contributions as I've described, this might encourage 5 municipalities to consider implementing or augmenting 6 provisions within their municipality to dedicate a 7 portion of their sales tax to remediate stormwater 8 needs; correct? 9 A. And that does occur right now under the 10 current program that we discussed. 11 MR. PALANS: I have no further questions. 12 MR. HAWES: All right. Thank you, 13 Mr. Palans. Any questions from other members of the 14 Rate Commission at this time? 15 Mr. Brockmann. 16 EXAMINATION 17 BY MR. BROCKMANN 18 Q. You said a moment ago that in 2008 or 19 10 years, or whatever it was, that the amount of 20 stormwater flooding issues that you're aware of was 21 1 billion, and it's now dropped to 562 just in round 22 numbers? 23 A. Correct. Yes. 24 Q. Okay. What do you attribute that to? 25 A. It's a couple of things. It is what happens Examination of Mr. Hoelscher By Mr. Brockmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 61 1 to stormwater as we move forward. Like I said before, 2 there are other activities, be they outside entities 3 doing work that addresses their own stormwater's part 4 of the development. 5 Sometimes stormwater problems get resolved 6 in our wastewater program. A lot of our sewers are 7 located next to creeks and streams, either buyouts or 8 rehab because the sewers go in. An evaluation of who 9 views what as a problem and what some of the actual 10 resolutions can be and what the customers feel is 11 actually a problem right now. Those constantly are 12 changing. There wasn't a big half million dollars -- 13 half million dollars in problems disappear. I don't 14 want to put that. 15 The staff's reason for putting in and even 16 doing -- and quite honestly, I'm somewhat wishing we 17 wouldn't have done that -- is to try and give 18 everybody a sense of what we think the size of the 19 program is in general, the idea being that there does 20 need to be a program to reflect that it is impacting 21 the District district-wide, and there's a lot of 22 people being impacted and that something needs to be 23 done. 24 Q. Is it possible that some of those reductions 25 came about from others investing in stormwater issues? Examination of Mr. Hoelscher By Mr. Brockmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 62 1 A. Yes. Yeah. And I would put -- let's 2 understand investing. Somebody builds a new 3 commercial development, and they have a creek problem 4 in the back yard, in the back where the creek is. 5 They will take care of those problems as part of that 6 redevelopment. Not necessarily to solve MSD's 7 problems but for their own commercial purposes. 8 Q. Did I also understand correctly that the 9 480 plus issues that you've identified here were 10 cross-checked with all other MSD projects that may 11 have any commonalities in, say, adjacencies or savings 12 done jointly with other projects? 13 A. Yes. Now, I would -- now, who made that 14 statement? Could I ask? 15 Q. I'm asking you that question. 16 A. Okay. You're asking me. So I would -- I 17 would guarantee the projects in the next one, two, or 18 three years. The most common thing is, don't build a 19 stormwater project the year after somebody replaces a 20 street. That's a bad idea if you're going to go 21 through the street. 22 So in the near term, first couple years it 23 is. The idea of us trying to coordinate if we get 24 funding a stormwater project with another entity, 25 another municipality 25 years from now, that becomes Examination of Mr. Hoelscher By Mr. Brockmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 63 1 rather difficult. So as it becomes available, we can 2 do that coordination we do. 3 Q. And how often do you think this review 4 should be done for this program if the voters approve 5 it? 6 A. I would leave to Rich. I think the goal 7 would be to start annually. That may adjust depending 8 on if we see any changes. I know I will put -- if 9 things seem to be going well, it might be more that 10 than. 11 If a new piece of information comes in from 12 a municipality that has done their own stormwater 13 study with various things, we may have new information 14 there as far as other problems and other priorities. 15 The most common one is getting information from people 16 that either "My situation has changed" or, in some 17 cases, the current property owner thinks it's no 18 longer a problem even when the project is programmed 19 for that year. "I don't want you on my property. It 20 isn't a problem. Don't do the project." 21 That's kind of the regular dynamics of a 22 stormwater program. 23 MR. BROCKMANN: Thank you. I have no 24 further questions. 25 MR. HAWES: Thank you, Mr. Brockmann. Examination of Mr. Hoelscher By Mr. Mahfood (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 64 1 Mr. Mahfood. 2 EXAMINATION 3 BY MR. MAHFOOD 4 Q. Brian, I know you've addressed this 5 repeatedly and in other parts of the -- in previous 6 meetings and other parts of this discussion, but in 7 your words, what do you see as the overall or role of 8 the District and vis-a-vis municipalities that are in 9 the district in -- focusing on stormwater here -- but 10 what do you see as, in kind of your own words, that 11 role? 12 A. So I'm going to give you my own words, and 13 I'm also going to take the opportunity to relay the 14 kind of messages I get from the individual 15 municipalities. 16 Q. Good. 17 A. In a perfect world, every municipality would 18 love for MSD -- now we're going to want the front end 19 of this program -- would love for the last 30 years 20 that MSD had had a stormwater funding source to be 21 able to address these issues as they come to the 22 municipality's attention, that MSD would take care of 23 them. That's always been a wish and desire. 24 For MSD to have a program to start 25 addressing these is the wish and desire of every Examination of Mr. Hoelscher By Mr. Mahfood (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 65 1 municipality. I think in listening to them, I 2 believe -- and I'm guessing here a little bit. I 3 think I'm probably onboard. Each municipality makes 4 kind of a different decision about where they stand in 5 that process. There are some who will rely solely on 6 MSD, and that is when they will get stormwater work 7 done. 8 Sometimes there have been successful things 9 like stormwater grant programs which, when you were 10 the boss, you were kind enough to allow us to have but 11 currently aren't available through the State. They 12 are looking for us to try and find other things like 13 that to provide more dollars that actually go from the 14 State directly to municipalities. 15 Some will rely solely on MSD. Others will 16 decide that they're in a position that their residents 17 would like them to address stormwater in a different 18 fashion. They'd like to provide extra dollars to do 19 stormwater faster than what MSD is doing. 20 Those municipalities have the authority and 21 the ability to collect in, primarily, the parts in 22 stormwater tax to address those kind of problems. 23 Almost every one of them would prefer we address them 24 all. 25 But there are some who take those stormwater Examination of Mr. Hoelscher By Mr. Mahfood (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 66 1 projects, address things that are their priority, will 2 work with them and try to team with them as much as we 3 can to get as much extra "umph" out of any of the 4 dollars we had programmed in order to coordinate with 5 their program. So have I given you -- 6 Q. No. That's what I wanted to kind of hear 7 what your view is and characterize the relationship. 8 A. So let me add one other thing. 9 Q. Please. 10 A. I think the worst thing that can happen is 11 MSD comes out of April with a no vote. And I mean, I 12 will tell you that is my biggest concern of this 13 process. I think it's the biggest concern of the 14 entire area. Long term, if this is successful and we 15 want to move faster and people are telling us that, I 16 guarantee you we'll be back here saying we should let 17 them go to increase the size of the program if we get 18 to that point. 19 But I will also let you know the same kind 20 of feedback we get back -- and some of you have heard 21 this at some of the meetings -- it's one thing to fix 22 an erosion problem that has crept up to somebody's 23 back patio that lives next to a creek. It's another 24 one if the voters know the top-priority issue we're 25 looking for was to make sure that water stands no Examination of Mr. Hoelscher By Mr. Mahfood (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 67 1 longer than an hour in somebody's back yard when it 2 rains, I've got a feeling the voters might have a 3 different impression as to whether or not this would 4 have them paying for something like that. 5 And that's something we're going to have to 6 track and, as we look in the future, and see what 7 potential review of this program looks like and once 8 we get started. 9 Q. I appreciate your comment about if we see 10 the success if this passes, we see the success that we 11 might be able to speed up with the consent of the 12 municipalities and, of course, the people in the 13 district, how we're doing this and maybe come back 14 here and say, hey, let's cut 10 years off of this. 15 Let's do -- or unless you can ramp up the number of 16 projects, however that corresponds timing-wise, but 17 I'm glad to hear that at least you're open to that 18 idea. 19 A. Well, and I would say, it's probably -- if I 20 could respond, it's probably not in our rate proposal, 21 but -- and it was probably our mistake to not put it 22 in there because it's just part of our world. If we 23 move forward and once we get started, we get to think 24 this is great. This is wonderful. We want you to 25 increase the size of the program -- MSD will respond Examination of Mr. Hoelscher By Mr. Stein (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 68 1 to that and be back to the Rate Commission about 2 changing the size of the program. 3 MR. MAHFOOD: Thank you very much. 4 MR. HAWES: Thank you, Mr. Mahfood. 5 Mr. Stein. 6 EXAMINATION 7 BY MR. STEIN 8 Q. Mr. Hoelscher, would you agree that the 9 magnitude of the back laws of the projects that you 10 face or we as a community face are largely due to the 11 development that has occurred in primarily in 12 St. Louis County back before there were adequate 13 controls on the stormwater such as requirements for 14 retention basins? 15 A. Yes. Just to characterize that a little 16 bit, I think there's less and less of that happening. 17 There was one -- there was a point where there were no 18 controls, and the first thing you wanted to do was 19 take a creek and straighten it out. Causes all the 20 problems we're talking about right here. 21 You're to today where the idea of changing a 22 natural creek is not a possibility. And any might 23 develops -- there are right now in the district 24 state-of-the-art requirements, regulatory 25 requirements, to make sure that the impact of Examination of Mr. Hoelscher By Mr. Stein (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 69 1 additional volume running off -- runoff coming off a 2 property does not have an impact downstream as well as 3 water quality issues which is another revenue source, 4 but those are in place. 5 So almost everything -- well, I'm going to 6 caveat that. Almost everything we're addressing is a 7 legacy issue. But I will tell you, MSD is seeing the 8 type of weather patterns that we're seeing now are 9 different than in the past. And so there are 10 stormwater concerns coming up now that are somewhat 11 new, primarily considering the frequency and intensity 12 of storms that we're seeing. We are seeing a change 13 in that, and that does generate additional stormwater 14 problems that weren't currently identified. 15 Q. If we look back over the last 10 or 20 years 16 when we started to institute stormwater controls on 17 new development, can you see a downward trend in the 18 number of complaints that you're receiving that are 19 creating new projects? 20 A. So I think -- I'm going to guess. I will 21 tell you, I don't have data unless Rich can say this 22 off the top of his head, we'll see. 23 I would say we've seen that -- we can -- we 24 can firmly say that under the current regs we have now 25 we're able to feel comfortable that we're not creating Examination of Mr. Hoelscher By Mr. Stein (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 70 1 any new problems as long as the new regs are being 2 abided by. We're not seeing any additional issues. I 3 would put to you, going along with not just regulating 4 what's on the current site, but also we're cognizant 5 of what's happening downstream and a little more 6 cognizant of making sure that whatever happens there 7 is -- even in the worst cases -- an emergency way for 8 the water to flow for stormwater to not cause a 9 problem. 10 Make sure even if a basin works as well as 11 it does and we get a storm greater than that, that 12 just downstream, that the old flooding water path, now 13 a house sitting right across the street in that flood 14 area. Make sure there's a release area that's 15 available in emergency. 16 Q. So absent any further increase in rainfall 17 amounts and events or any increase in the size of 18 MSD's boundaries, we should anticipate over the next 19 10 or 15 years that the annual growth in required 20 projects is going to decrease; would that be true? 21 A. In the aggregate, yes. I -- I'll just give 22 you one example. You, being an engineer, maybe you'll 23 understand. Like I said, you know, creeks move; 24 right? So if you may be in -- and it's a completely 25 dry place -- 20 years from now, that may be where the Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 71 1 center of the creek is. So there's always that kind 2 of natural thing going on. 3 But I think we're in a place from a 4 regulatory perspective that we shouldn't be creating 5 any new issues other than, I said, the changing 6 weather patterns that we happen to be seeing. 7 Q. So if that's true, should we now also 8 anticipate going forward that the precision of your 9 estimates for this capital program will increase? 10 A. As we get closer. Sure. Yeah. 11 MR. STEIN: Thank you. 12 MR. HAWES: Thank you, Mr. Stein. Any 13 further questions? 14 Oh, okay. Mr. Goss. 15 EXAMINATION 16 BY MR. GOSS 17 Q. Mr. Hoelscher, I wanted to just try and 18 spend some time to understand how MSD works for 19 municipalities. You just had a long discussion with 20 Mr. Palans about priorities and that sort of thing. 21 And I heard in a couple of your answers you talked 22 about the criteria of municipalities. 23 Does -- do other municipalities in the 24 region, do they adopt the same priority system or 25 scorecard, as we're calling it, that MSD uses to Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 72 1 prioritize projects? 2 A. We can ask a detail, which I don't believe 3 they do. And they're under no requirement to do so. 4 I think they have their own system for determining 5 what's a priority. 6 Q. Do you have any sense of what that system 7 is? 8 A. I do not, no. 9 Q. Because in some of the -- and this may be me 10 just misshearing. Did some of the -- what I was 11 hearing is some kind of almost disconnect between one 12 of the municipalities regarding as the priority and 13 what MDS regards as the priority based on MSD 14 scorecard. So you're scheduling a project. You say 15 it's either a 10-project, and the municipality says, 16 oh, no, that's a right-now project for us. 17 Would -- would it help if the municipality 18 were using a scorecard system like MSD uses to help 19 harmonize that ranking? 20 A. Yeah. I think -- if you think about it, I 21 don't think that's probably the cause -- whatever 22 priority system they use, I don't think that's the 23 cause of the disconnect. Understand that a 24 municipality is saying this is a year now, year-one 25 problem for us within our municipal boundaries. MSD Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 73 1 project list is all 525 square miles of our area. 2 Q. Right. 3 A. I -- years as an engineer, a director of 4 engineering here. I imagine there are very, very few 5 cases within the same municipality where there was a 6 priority difference of the projects just within a 7 municipality. I suspect they were pretty close. I 8 don't have any way of knowing exactly whether that's 9 the case or not. 10 Q. And this may be my misunderstanding of the 11 scorecard system, but I thought the way it worked was 12 MSD would look at whether there are structures being 13 impacted, the number of structures being impacted, 14 some pretty objective criteria; is that right? 15 A. Right. And that's the benefit, so the 16 benefits being what problem is it that you're going to 17 address? And again, a back yard eroding rule has a 18 lower benefit value than a home where erosion is right 19 up to the back steps, so -- and then everything in 20 between. 21 Q. Okay. And then the cost is -- we've heard 22 very emphatically today -- are the costs that it costs 23 to relieve -- 24 A. I'm glad you caught that. 25 Q. I definitely caught it. -- are the costs to Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 74 1 remedy the problem. 2 A. Correct. 3 Q. So those -- so as I hear both of those 4 things, it seems to me that those should be the same 5 regardless of -- well, the results should be the same 6 regardless of which political subdivision is applying 7 that scorecard, whether it's a municipality or MSD. 8 A. And I don't know that the municipalities use 9 our scorecard. 10 Q. Right. 11 A. My feeling is that they probably don't. 12 Q. Okay. But if they did, then -- because 13 you'd agree with me that the scorecard should come out 14 the same regardless of who's applying the scorecard, 15 whether it's Ladue or whether it's MSD? 16 A. If they are using it exactly the same way, I 17 guess so. Yes. It would seem so. If it's an 18 objective thing and everybody has been trained on how 19 to do it, yeah, the results should come out the same. 20 Q. Okay. And then my sense was that it is 21 objective. You stated that several times. So if that 22 were -- and my understanding of what happens with the 23 scorecard is that it's a number results. And then 24 you're taking that number, and you're ranking that 25 number against all the other projects in the entire Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 75 1 MSD area; is that right? 2 A. Correct. 3 Q. Now, has that scorecard been applied to the 4 460 or 483 projects that you've identified or not? 5 A. I believe there's an exhibit that gives the 6 prioritization calculation for all the issues we've 7 identified. I think that's an exhibit or a submittal 8 we've already made. 9 Q. Yeah. I think so, too, and what I couldn't 10 remember and is the reason I'm asking the question is 11 whether that was limited to, like, five years or the 12 first five years that you project or if it's the 13 entire 30 years? I just can't remember. 14 A. I would have to look at the document. I 15 think we've given a preliminary score for everything 16 that's on the entire 500 million plus list. 17 $500 million plus list. I think there is a score on 18 that spreadsheet. I would have to see the exhibit 19 myself. 20 Q. Okay. So if -- if the system were an 21 objective system and municipalities were using it and 22 MSD is using it, everybody is using the same system 23 and there was a score produced, am I mistaken that if 24 the municipality came to you in that project and said, 25 okay, this has a score of 10 -- I forget what the Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 76 1 numbers are, but -- and it would be a 10 on MSD's 2 list, wouldn't that then fall under the priority 3 system that MSD has devised for all these projects? 4 A. Correct. And so for the City, if the 10 is 5 the highest priority and it fits into their year one, 6 that's good. MSD may have other projects with 7 priorities from 11 to 50 that occur the first nine 8 years, and that would make it a 10-year -- a year-10 9 project for MSD. 10 Q. Thank you. That helps clarify that for me. 11 We can argue or disagree about the philosophy of 12 whether you should be applying the money and whether 13 it saves or not. I tend to agree with Mr. Palans' 14 words of worth, that I don't think we're creating an 15 incentive for private money to come in, and I would 16 encourage the District to think a little bit more 17 about that. 18 I perfectly respect your position and your 19 stand and you're emphatic about it. I'm not sure that 20 we've -- that we really are creating an incentive for 21 third-party dollars the way this is currently set up. 22 MR. HAWES: Mr. Goss? 23 MR. GOSS: Yes? 24 MR. HAWES: We've had a request for a 5- or 25 10-minute break. Could you hold that next question? Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 77 1 MR. GOSS: I'll be glad to hold that next 2 question. I was actually going to move on to a 3 different topic. It's perfect. 4 MR. HAWES: All right. Very good. We're 5 going to take till 11:15. 6 (A short break was taken.) 7 MR. HAWES: All right, Mr. Goss, when you're 8 ready. 9 Q. (By Mr. Goss) Mr. Hoelscher, I just wanted to 10 ask you if you can elaborate on some of the comments 11 you were making to Mr. Stein about how these 12 stormwater detention requirements had changed over 13 time with respect to development and how you're 14 anticipating the stormwater flows that may occur from 15 a project or downstream differently than you did back 16 in, say, the '70s or '80s. 17 A. So let's do that and not just the way MSD 18 did, but just for particular issue, point of 19 information, before 1989 west of 270, the County was 20 actually responsible for County stormwater 21 regulations. 22 So to build on that, if you characterize 23 what was done 30, 40 years ago, property was taken 24 from a green space to a developed condition with a lot 25 of impervious area that generated an increase in storm Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 78 1 runoff volumes. It also increased the pace at which 2 that discharge happened. 3 The sole concern -- and again, I'm 4 generalizing here -- the sole concern was to put 5 detention in to hold that water so that the peak 6 amount of discharge from the site for a given storm 7 did not exceed the peak discharge from the site prior 8 to development. 9 So if 10 cubic feet per second came off 10 before development, you hold the water backing up, 11 that the discharge would discharge no more than 12 10 cubic feet per second for the same storm. That was 13 pretty much what was done. 14 The idea being, back then, that the problem 15 was an increase in discharge that would both increase 16 volume, cause flooding, and also increase velocities 17 within creeks and streams that cause erosion. 18 Just in general from that, it's became 19 obvious that just holding the total -- the incremental 20 discharge per second, cubic feet per second, to the 21 predevelopment site wasn't enough. It turns out that 22 allowing that extra volume of water to stay at that 23 level for an extended period also starts causing 24 things like erosion and other things. 25 So jumping to where we're at today, there Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 79 1 are the same type of considerations on a regulatory 2 perspective for new development that takes care of the 3 change in runoff issue. Both the volume -- the volume 4 and its -- depending on where you're at, there's at 5 least 100-year, in some cases a 20- or 25-year 6 detention that's done. 7 There's also -- and we've talked about the 8 revenue what comes here through regulatory 9 requirements. There's also another set of detention 10 that happens at much lower storms that have to do with 11 stormwater quality. I'd mentioned MSD collects a tax 12 to take care of those issues. 13 So there's another set of detentions that 14 are meant to hold back pollutants that are running off 15 impervious area and also to help with low storm 16 frequency erosioning in creek impacts. 17 And sometimes these two different detention 18 or these two different strategies can overlap, and 19 they can put different things in place. So that's 20 kind of an additional regulatory concern that's come 21 up in the last 30 or 40 years. 22 The other thing downstream -- and I think 23 this is the elaboration you asked me to with 24 Mr. Stein -- is probably the focus 30, 40 years ago 25 was what's coming off that particular property for Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 80 1 that given storm. So a couple of things happened. 2 Whatever -- if you're in the stormwater business long 3 enough, you find out that whatever you design 4 something to handle, tomorrow there will be a storm 5 higher, bigger than that; right? 6 So one of the things we do take into 7 consideration is in those instances what happens 8 downstream. And I think the example I had previously 9 given was if somebody -- a development builds a basin, 10 we don't want right across the street in a valley to 11 be a house that is the overflow path in case we get a 12 storm larger than the facilities we put in because 13 that's going to cause problems. So we make sure those 14 issues are addressed. 15 There's also a possibility that there are 16 downstream stormwater problems that are going on, and 17 we want to make sure that those kind of events won't 18 exasperate existing issues, stormwater issues, that 19 are downstream. 20 So I think the term that's used, sometimes 21 there was additional detention or additional 22 provisions that were required as part of the 23 development to make sure that we don't impact beyond 24 what's currently going on, impact anybody else with 25 regard to stormwater. The focus is much more Examination of Mr. Hoelscher By Mr. Beckmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 81 1 area-wide than it is just the individual development 2 sites. So that's kind of the major changes that 3 happened in stormwater regulation. 4 MR. GOSS: Thank you. That's all I have. 5 MR. HAWES: Thank you, Mr. Goss. 6 Mr. Beckmann. 7 EXAMINATION 8 BY MR. BECKMANN 9 Q. Yeah. I had a couple of questions. We've 10 stated a number of times about the lack of detail 11 that's gone into the estimating and engineering of 12 these projects. I guess I need to ask, at what point 13 are the scope and costs of the projects verified? 14 A. Depending of where we're at in the program, 15 how much detail, it can be anywhere, different 16 degrees, but in the two- to five-year period. When 17 you get two years out, they are well defined. Most of 18 our programs consist of design phase than a 19 construction phase. And so that's kind of the 20 two-year process. So anything that's programmed up to 21 two years out has pretty good detail. Out to 22 five years has a little more detail. 23 And those are checkpoints where prior to 24 pulling down priorities, it is possible that a 25 priority can change either because a situation has Examination of Mr. Hoelscher By Mr. Beckmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 82 1 changed -- and it can change both ways. Something 2 needs to be moved up in priority, or we go and take a 3 look, and the easiest one that happens to us is we 4 have a flooding problem. We go to the new property 5 owner. He's ready to be scheduled for year three. 6 He says it's not the problem. I don't want 7 you doing a project. We'll do the project. We'll 8 drop off because it's not an issue. So that kind of 9 thing goes on between the projects for about year two 10 through five. 11 Q. Okay. So at what point, you know, if this 12 issue passes and funds are allocated, at what point 13 would you envision construction occurring? 14 A. So we are proposing to collect the not-full 15 rate from January 2020 through the summer of 2021. 16 We're, like, the full $2.25 per average residential 17 customer. That's to allow us to do some planning, 18 allow us to do some engineering because, obviously, 19 the big cost is in construction. 20 So we've kind of programmed how quickly we 21 think we can mobilize -- transfer some individuals who 22 are in the wastewater program internally to take a 23 look at this, hire a few others, and mobilize outside 24 resources. 25 So you'll see major regular construction Examination of Mr. Hoelscher By Mr. Beckmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 83 1 starting in the summer of 2021, although there will be 2 some work that's going to be for them. And I would 3 also put there's still the $67 million of projects 4 that came from Prop S. About 30 percent of those have 5 been completed. Those are going to be completed 6 during the same time period. 7 Q. Thank you. One final question. Why was the 8 30-year proposed duration proposed? I don't 9 understand why we would like to pull this out over 10 30 years. It seems to me like costs and conditions 11 are much more variable over that period. 12 A. So as far as a time frame, there were 13 two components that go into this addressing any set of 14 capital or just by the nature of the stormwater issues 15 we have and how they change and how they vary, how we 16 suspect we're going to get information. The current 17 problems are no longer a problem. How we're going to 18 get information that there's problems we know about 19 that haven't been reported to us yet. 25 to 30 years 20 seem like a pretty reasonable time period. 21 The other factor that went into 22 determining -- I will tell you we didn't determine to 23 get it done in 30 years. That's not what happened. 24 We determined that's a pretty good time period. It 25 does work out to be about a 25- or 30-year period. Examination of Mr. Hoelscher By Mr. Beckmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 84 1 The other thing -- and I believe we have 2 submitted that as an exhibit. I would have to check 3 with some of the polling of the public which we 4 regularly do. We did a pretty massive -- myself, my 5 manager, public affairs -- communication effort with 6 municipalities interested, civic groups, other groups 7 trying to find out what their feel was on stormwater, 8 where we need to go, and what we need to head towards 9 along with some recent polling. 10 And another factor that went into the size 11 of the program was, what is the ratepayers' appetite 12 for paying for a program at all, an annual cost? 13 I mean, you know, it would be great if we'd 14 spend a program that cost the ratepayers $100 a month 15 and they thought it was worth it and we -- but I don't 16 think that's what they're willing to pay. I think our 17 data shows that for us to get a program in place, the 18 program size we're proposing, we believe, once 19 educated, that the voting public will find that that's 20 an appropriate level expenditure to address those 21 issues. 22 Q. Okay. I don't know if the public has a real 23 grasp of a 30-year program, to be honest with you, and 24 it seems like it ought to be shorter. 25 MR. BECKMANN: I have no further questions. Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 85 1 A. Well, I -- and just to expand. I think the 2 thing was, remember, I will give you -- if you look at 3 our results -- there is a very significant portion of 4 the public who doesn't believe we should spend any 5 money on this at all regardless of the length or size 6 of the program. 7 And so I think making sure we size it in a 8 way that the public feels is an appropriate level is 9 one of the considerations that we took when we set the 10 program. 11 MR. BECKMANN: Okay. Thank you. 12 MR. HAWES: Thank you, Mr. Beckmann. 13 Any further questions from the Commission? 14 MR. GOSS: I did have one follow-up. 15 EXAMINATION 16 BY MR. GOSS 17 Q. We had talked at a prior hearing about 18 subdivision associations and their inability, for the 19 most part, to be able to participate in the credit 20 program because their stormwater basins aren't taxed 21 as a separate parcel. 22 I think it was Rich who said if they had a 23 clubhouse or something and that was being taxed, then 24 they would be paying into the program, but otherwise, 25 they wouldn't be. And so they couldn't really take Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 86 1 advantage of the credit program that's being offered. 2 And you may or may not recall that. 3 My take away was that the subdivision 4 association wasn't going to be able to apply trustees 5 to a subdivision; weren't going to be able to apply at 6 the end of the project to approve the detention basin 7 to fix these problems from the '70s or '80s because 8 the basin just doesn't function the way it should or 9 wouldn't under today's standards. They wouldn't be 10 eligible for the credit program. 11 And one of my thoughts was in that 12 subdivision, the benefit -- the benefit of the parties 13 from that detention program are the residents who live 14 there, and that's how they are taking care of their 15 stormwater. It's all going to that basin, and it's 16 going out and it's causing flooding problems. 17 If there -- if there were a way to combine 18 those residents' credit, if an individual resident 19 were doing that project, they'd be entitled to a 20 credit because they are paying a fee on their home, 21 their stormwater. 22 If they could combine that and apply that to 23 the subdivision association to a detention project, 24 that, to me, would be of benefit. That would be a 25 positive thing because I think one of the problems we Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 87 1 have in our region are these detention basins that 2 were designed to a different set of criteria. I mean, 3 the builders built what they were told to build. If 4 they were told to build something else, they would 5 build something else. 6 And so I think we do need to retrofit them, 7 but I don't see individual residents, they're not 8 going to do that. They're not going to -- and 9 particularly, in associations that they can't apply 10 for the credit because it's -- they're not paying the 11 fee themselves from their real estate. That seems to 12 me to be -- I don't want to say a hole, but a problem 13 in the program. 14 I would like the -- I don't know if there's 15 a way for the District to think about allowing 16 residents to combine that credit with an association 17 that's working on a detention basin project, if that's 18 something the District would consider or not. I don't 19 know if the current rate allows for that or not. I 20 didn't see it in the proposal. 21 I would -- I don't know if you have any 22 reaction to that now, but I would encourage the 23 District to think about it. Because I agree that the 24 amount of the credit isn't a lot of money, but 25 anything helps. And if you could go to the Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 88 1 association and say, look, we're pooling $135 over 2 20 residents, then that becomes a little bit more 3 meaningful and that then can apply to fix that 4 detention basin. You might see people doing that 5 then. 6 So I don't know if you have any thoughts on 7 that. 8 Q. Yeah. I -- let me -- one, I will tell you 9 right now I'm not going to get the details exactly 10 that you mentioned with Rich. I think you understood 11 it correctly. I'm not the person to know exactly the 12 details, but I think two things to expand on that we 13 had mentioned, that Rich and I had already talked 14 about, is if the resolution to a stormwater problem, 15 the cost-effective resolution to downstream erosion 16 and flooding to houses and homes, if the most 17 acceptable way of doing that is to upgrade a 18 40-year-old detention basin that is privately owned, 19 if that's the most beneficial way for us to solve a 20 stormwater issue, there's nothing to preclude us 21 having that type of project within this program. 22 I don't know that we've identified anything 23 like that outside of existing ones. It may be that 24 some of these stormwater problems, once we do a 25 detailed analysis, might be, "Let's put our own Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 89 1 detention basin here to capture this and resolve those 2 issues." 3 So the first thing that comes to mind is 4 those areas aren't completely a void -- exempt from 5 the capital program if MSD feels, hey, this is a 6 beneficial way to solve -- to solve a public problem. 7 The other piece is that -- well, I don't have another 8 piece. 9 I think the other part about the credits, I 10 think we make it a point to consider those things, and 11 I'm just trying to reverse -- heard what you said, and 12 I don't really have a reaction to that because I can't 13 think of the details of the program you mentioned. So 14 I'm probably the wrong person to get a reaction from. 15 Q. Right. And it's just something I'd like the 16 District to think about and explore because that's a 17 way I think the credit can be used more effectively. 18 A. When you say "the credit," help me out on 19 that. 20 Q. Well, if you improve your property, you do 21 some kind of detention project on your property, 22 you're entitled for a credit. This hundred and -- I 23 think the number was like 130 bucks or 135 bucks. And 24 I think the testimony I heard from most people was, 25 yeah, we realize that's not a lot of money and it may Examination of Mr. Hoelscher By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 90 1 not incentivize behavior, but it's certainly a nice 2 thing to do, and so let's do it. And maybe it does 3 incentivize some behavior. 4 My thought is if you can pool that money to 5 a problem like a detention basin, then it may become a 6 meaningful credit that people will actually use to fix 7 a real problem because these detention basins that 8 are -- are a problem, and these associations don't 9 have the money to go out and fix them. 10 But if they knew that -- wait a minute. 11 There's some real money out there that we can apply to 12 this. It's money that we're paying on our taxes 13 anyway. We're paying a fee anyway to MSD. Why don't 14 we put it to work on a subdivision and fix something. 15 People might do that. 16 A. Okay. I think -- 17 Q. That's the idea. 18 A. So I know what you're thinking. I think if 19 you want us to pursue that further as a representative 20 of these proceedings, I would ask that -- I'm sure 21 he's listening -- ask Rich Unverferth. He probably 22 has some more in-depth thoughts and be able to expand 23 on it more than I would, so... 24 MR. GOSS: Great. Thank you. 25 MR. HAWES: Thank you, Mr. Goss. Examination of Mr. Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 91 1 Mr. Palans. 2 EXAMINATION 3 BY MR. PALANS 4 Q. Just a brief follow-up, Mr. Hoelscher. 5 Going back to the size and scoping of the problems 6 within the district, I think it's pretty clear that 7 the $562 million estimate is -- it's a rough estimate 8 that we have. It's a rough estimate that that 9 $562 million will remediate the issues that we've 10 identified within the district. When I asked you what 11 the likelihood of that $562 million fixing or 12 remediating all of the issues within the district 13 today or over the next 30 years, your testimony was 14 that there's a chance that it will; correct? 15 A. Yes. 16 Q. I'm going to go back to your surrebuttal 17 testimony, response to Question 1, and you reference 18 in that, "MSD Charter provides broad powers to the 19 District to ensure" -- and I emphasize the word 20 "ensure" -- "adequate stormwater damage throughout the 21 district." And that's Article 3, Section 3.020(1); 22 correct? 23 A. Yes. 24 Q. And they use the word "ensure"; right? 25 A. Yes. It's not in quotes, so I'm assuming Examination of Mr. Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 92 1 that that word is actually in the Charter, but yes, my 2 testimony is to ensure, yes. 3 Q. And ensure is a lot different than a chance 4 that it will provide adequate stormwater damage 5 throughout the district? 6 A. I believe, also, ensure is not meant to mean 7 guaranteed. 8 Q. Ensure means more than just a mere chance, 9 wouldn't you agree with me? 10 A. Yes. 11 Q. And your answer in No. 2 is Article 3 of the 12 Charter Section 3.20(2) "Empowers the District to 13 provide" -- I'm skipping down -- "provide an effective 14 and advantageous means for ensuring the area within 15 the district of adequate stormwater drainage." 16 Again, they use the word "ensure"; correct? 17 A. Yes. 18 Q. And ensure is a lot different than a chance; 19 right? 20 A. Yes. 21 Q. And it continues on to the next page, and 22 "The Board is to take any and all steps as the Board 23 may be necessary and proper to effect the purposes 24 hereof." 25 That's it in the Charter; right? Examination of Mr. Hoelscher By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 93 1 A. Yes. 2 Q. So would you agree with me that there is 3 power within the Charter to interpret a cost sharing 4 program, as I have described to you, where MSD's costs 5 are reduced; the scorecard is readjusted based upon 6 that reduced cost; and projects are reprioritized 7 based upon this incentive that is given to third 8 parties to help remediate the problem? 9 A. I think the problem would be the other part 10 of the Charter, that our rates are fair and 11 reasonable, all classes of ratepayers. I think that 12 would probably restrict us there. That's my opinion. 13 MR. PALANS: Thank you. I have no further 14 questions. 15 MR. HAWES: Thank you, Mr. Palans. 16 Any -- anything additional from the Rate 17 Commission at this time? Hearing none. 18 Mr. Neuschafer, do you have any questions 19 for Mr. Hoelscher of behalf of Missouri Industrial 20 Energy Consumers? 21 MR. NEUSCHAFER: I do not. The 22 commissioners did my job for me. 23 MR. HAWES: Thank you. 24 Ms. Stump, do you have any questions on 25 behalf of the Rate Commission? Examination of Mr. Hoelscher By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 94 1 MS. STUMP: I do. Just a couple short ones. 2 EXAMINATION 3 BY MS. STUMP 4 Q. Mr. Hoelscher, your surrebuttal testimony 5 has to do with the CIRP; correct? 6 A. Yes. 7 Q. I had a couple questions actually about the 8 fourth discovery responses related to the CIRP. Can I 9 ask those of you? I don't know if you responded to 10 them, but specifically -- do you have those in front 11 of you? 12 A. I do somewhere. 13 Q. Specifically -- 14 MS. MYERS: Which -- 15 MS. STUMP: 6, 7, and 8. The last one. The 16 one you just submitted, yeah. 17 THE WITNESS: Questions 6, 7, and 8. Okay. 18 Q. (By Ms. Stump) And I just -- really, they're 19 factual. I'm trying to clarify. 20 A. Okay. 21 Q. On response to No. 6 talking about the 22 development of the prioritization system, whether it 23 had been reviewed by experts, it talks about -- first 24 of all, you talk about how the process began, and 25 there was public input. Examination of Mr. Hoelscher By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 95 1 And then the second paragraph talks about 2 prioritization systems upgraded by MSD and Parsons in 3 2006. Couple questions about that. 4 Was there -- do you know if there was public 5 input at that time, too, when it was kind of redone 6 and updated in 2006? 7 A. I wasn't involved -- I would ask that 8 probably Rich Unverferth would be the best one to ask 9 that question. I don't know. 10 Q. Okay. And then if we go down to No. 8, the 11 response, MSD responds that the final report was in 12 2010 provided as Exhibit MSD 37-G. I just wanted to 13 clarify what happened between 2006 and 2010. 14 Was there another upgrade, or was that -- 15 was Parsons involved again? Or was it just -- I'm 16 wondering why No. 6 refers to 2006 and then No. 8 17 refers to 2010. 18 A. And I would ask you to ask Rich Unverferth 19 about that, if you would. 20 Q. Okay. Okay. One question about No. 7. 21 Talking about the -- how the District came up with its 22 prioritization scoring system and stating that the 23 benefit to the cost ratio -- to the cost ratio's model 24 after the approach in Virginia Beach, Virginia. 25 I'm just wondering if you could explain a Examination of Mr. Hoelscher By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 96 1 little bit what about was appealing about that 2 approach. 3 A. I believe Mr. Unverferth would gladly 4 explain to you what was appealing about that approach. 5 MS. STUMP: Okay. And I don't -- I do not 6 have anymore further questions for you. I will wait 7 to speak with him. Thank you. 8 MR. HAWES: Thank you, Ms. Stump. 9 Ms. Myers, do you have any questions for 10 this witness? 11 MS. MYERS: I do not. 12 MR. HAWES: All right. Thank you very much, 13 Mr. Hoelscher. 14 THE WITNESS: Thank you. 15 MS. MYERS: Would you like the District to 16 call our next witness? 17 MR. HAWES: Please. 18 MS. MYERS: Okay. The District would like 19 to call Rich Unverferth. 20 * * * * * 21 RICH UNVERFERTH, 22 having been duly sworn, testifies as follows: 23 * * * 24 MR. HAWES: Any questions from the Rate 25 Commission for Mr. Unverferth? Mr. Goss. Examination of Rich Unverferth By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 97 1 2 EXAMINATION 3 BY MR. GOSS 4 Q. Mr. Unverferth, you heard my discussion -- I 5 think that's on -- you heard my discussion with 6 Mr. Hoelscher just a few minutes ago about trying to 7 make the credit available to Homeowners Associations 8 through some kind of pooling of the credit that 9 individual homeowners would otherwise have because 10 their stormwater problems in that subdivision really 11 are associated with the subdivision detention basin as 12 opposed to their individual homes. 13 I'd ask the District to give some 14 consideration or thought to that. I don't know if you 15 had time to think about that or have any reaction. 16 Obviously -- obviously, you came back really quick 17 from that -- 18 A. Right. Yeah. That don't surprise -- Brian 19 volunteered me pretty quick. 20 Q. He does that a lot. 21 A. No. Actually, when we were discussing 22 because of a subdivision situation where there is a 23 regional basin for the subdivision, we did have some 24 modest discussion, but really came down, logistically, 25 how do you apply, you know, a 50 percent rate to the Examination of Rich Unverferth By Mr. Goss (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 98 1 people of the subdivision depending on how it is? 2 It's our understanding that we didn't look at it too 3 deeply, but I think we could -- we probably could 4 explore that a little farther than has been done. 5 I think what it came down to is the -- who 6 you apply it to because in some cases the subdivision 7 properties, they go to different basins. There's 8 multiple basins in there. So those are some of the 9 watershed things that kind of came into play there. 10 But I think it's definitely something that we could 11 explore because if that basin were to collectively be 12 enhanced to some extent, depending on how much water 13 is flowing in the basin and how it operates currently, 14 what that credit might look like, it's just -- we 15 didn't put a whole lot of thought to it. 16 But as listening to you explain, I think 17 that there would be definitely some potential for 18 that. That wouldn't, as you stated, 135 isn't going 19 to break the bank. You know, again, when we've talked 20 about credits in the past, it's not a lot of credit 21 because we're not charging a lot to begin with. But 22 if it could collectively address an issue and we can 23 show that, then definitely would be something that 24 we'd probably would look at considering. 25 Q. Yeah. I would appreciate the District doing Examination of Mr. Unverferth By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 99 1 that. You know, my -- I don't expect that, you know, 2 detention basins are going to rise to the priority 3 level that we have under the scorecard and the capital 4 improvements project. They're just not that huge. 5 But a lot of little problematic detention basins add 6 up to collectively a big problem for our region, and 7 that was just a thought I had and a way to maybe make 8 that credit and incentive to where associations really 9 do try and address the problem and take care of it, 10 so... 11 A. Yeah. We do have inventories of what basins 12 are out there. We know -- with the benefit of GIS, we 13 may be able to make some kind of analysis of what we 14 might be able to do as well. 15 MR. GOSS: Great. Thank you very much. 16 MR. HAWES: Thank you, Mr. Goss. 17 Mr. Palans. 18 EXAMINATION 19 BY MR. PALANS 20 Q. Just in reference to your surrebuttal 21 testimony and Question 1. I note in there -- I think 22 it's right in the middle or maybe towards the -- 23 perhaps the second-to-last sentence. You say that 24 "The District receives hundreds of calls received 25 annually from MSD customers requesting assistance in Examination of Mr. Unverferth By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 100 1 dealing with flooding or erosion issues." 2 There is a public expectation that MSD 3 respond to these issues; correct? 4 A. That is correct. 5 Q. And we're talking hundreds of calls. I'm 6 not -- do you have any estimate? Are we talking 200? 7 300? 8 A. Actually, when we were answering this, we 9 went and looked at, like, a past three years' history, 10 anywhere from 5- to 600 annually, calls that we 11 receive. And again, I think Brian touched on a little 12 bit. It can be anywhere from, "Hey, I've got water 13 sitting in my back yard" to "The creek has now decided 14 to take a turn towards my house and I have a concern." 15 What I didn't do -- I'm saying that. I 16 couldn't sit here and tell you how many of those we 17 basically said, they're really not an issue, or they 18 elevated to the level of the project. I can't say 19 that offhand. 20 Q. 500 to 600 calls. I think just by the sheer 21 number, you've helped identify the fluidity -- that's 22 a bad choice of words -- but the fluidity of the 23 number of problems that you're dealing with; correct? 24 A. That is correct. 25 Q. And that 483 projects that are currently on Examination of Mr. Unverferth By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 101 1 the books, capital projects, they may be impacted by 2 these 500 to 600 calls each year? 3 A. That is correct. It's not uncommon for us 4 to receive repeat calls depending on the size of the 5 rain event or that type of issue, say, an erosion. 6 Q. A number of storms, intensity of the rain, 7 the amount of volume of water, all that impacts the 8 calls you get; correct? 9 A. Right. I mean, taken into consideration, we 10 had a flood in the end of December of 2015 and another 11 one in April of 2017. That's in that same window or 12 period. But I've been in the district for 31 years 13 and been involved in -- spent seven years in our 14 operation where my primary sole purpose was a team 15 that went out and investigated stormwater problems, 16 and that number is pretty consistent. 17 Q. If we just take an average of 500 to 600 18 calls a year, multiply that times 30 years, we're 19 talking about 15- to 18,000 calls over that period of 20 time in round numbers. 21 A. That is -- that is correct. But like I 22 said, you have duplicate calls. You have some that it 23 was -- it was a big rain event. Did it impact their 24 home? Did their yard have a lot of water in it? You 25 know, I think that that's a lot of them, and Examination of Mr. Unverferth By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 102 1 generally, it's here are some things maybe you can do 2 yourself. That's how we tried to address a lot of 3 them is that -- you know, it's just, generally, things 4 around the home. 5 Q. And the -- in terms of sizing the problems 6 that we have at $562 million, it's kind of hard to 7 size this type of problem given the fluidity of the 8 problems that are raised; correct? 9 A. Yeah. We do our best. We take a look if 10 we're out there for a single residence, you know, we 11 don't necessarily look at that single residence. We 12 look, okay, what's happening within the neighborhood? 13 And we may not know it directly when we first go out 14 there. And then we come back and look at our database 15 and understand, hey, there's a regional solution here. 16 Or we responded right down the street here, and we 17 have a solution. 18 That's where we try to -- at that point try 19 to regionalize, say, a solution to get a better feel 20 for it as opposed to fix it all, 500 of those little 21 bitty problem areas. 22 MR. PALANS: Thank you. I have no further 23 questions. 24 MR. HAWES: Thank you, Mr. Palans. 25 Any questions from Rate Commission members Examination of Mr. Unverferth By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 103 1 beyond? 2 Hearing none. 3 Mr. Neuschafer, do you have any questions? 4 MR. NEUSCHAFER: No questions. 5 MR. HAWES: Ms. Stump? 6 MS. STUMP: I have a couple that he has 7 already heard. 8 EXAMINATION 9 BY MS. STUMP 10 Q. Okay. Can we go back then to -- do you have 11 the discovery response in front of you? 12 A. Yes, I do. 13 Q. Okay. So first on Question No. 6 where the 14 District responded that the prioritization system was 15 upgraded by MSD and Parsons in 2006. My first 16 question was whether there was public input and 17 participation at that time. 18 A. To my knowledge, there was not any 19 additional public input. 20 Q. And then can you explain to me the question 21 I had about the difference -- the 2006 action and then 22 later on in No. 8 referring to the current system was 23 done in 2010? 24 A. The final report we had -- that was actually 25 a four-year process where we reevaluated all the Examination of Mr. Unverferth By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 104 1 projects within the district at that time and took 2 four years initially when we first started the 3 process. Process 1 was to look at the prioritization 4 system, making sure before we start looking at all the 5 projects we had a consistent prioritization system and 6 process system in place. It just took us till 2010. 7 If you look at the report the end date is 2010. It's 8 the same report. 9 Q. Just clarifying. Thank you. And then on 10 No. 7, talking about how the District modeled its 11 approach after Virginia Beach, Virginia. Can you 12 explain a little bit about what it was that the 13 District liked about the Virginia Beach approach? 14 A. To the extent, no. I have not -- 15 Q. Sure. 16 A. -- reviewed the Virginia Beach. But 17 essentially it's a benefit-to-cost ratio for the 18 evaluation of stormwater projects. 19 In other words, it was a simplified version 20 as you can see in that same answer. There were other 21 benefit cost ratios that were looked at. The District 22 was looking at one that wasn't so overly complicated 23 that, you know, that we just -- you know, that would 24 make it more difficult to do. So apparently, the one 25 from Virginia Beach was more of a simplified benefit Examination of Mr. Unverferth By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 105 1 cost. 2 Q. So it was the fact that it was simplified? 3 A. Correct. And again, I wasn't -- 4 Q. You weren't involved? 5 A. -- involved at that time, but that's my 6 knowledge of what I read. 7 Q. Okay. Can we turn to your surrebuttal 8 testimony for -- just one question left. 9 A. Okay. On number -- Question No. 2: "Is the 10 purpose of the residential incentive program to 11 provide an incentive to reduce the effect of 12 impervious area within the surface area by using 13 volume reducing stormwater EMPs?" 14 And then you answer, "Not specifically." 15 Can you explain to -- a little bit more then 16 about what you would say the purpose of the 17 residential incentive program is? 18 A. Well, it's primarily one to offer they -- 19 some type of a credit to an individual homeowner that 20 has an interest in doing something to benefit 21 stormwater runoff because there are people out there 22 that are actually doing that now. 23 In other words, there are people that are 24 putting in green practices, and if they're willing to 25 do that and go to the expense and operate and maintain Examination of Mr. Unverferth By Mr. Mahfood (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 106 1 those, we felt like it was important to provide some 2 type of an incentive to them. 3 In other words, what it also does is it 4 increases public awareness that this type of green 5 practice would enhance stormwater runoff both quality 6 and quantity. If it were -- if you were able to do a 7 magic wand and everybody had a rain garden. 8 Does that answer that? 9 MS. STUMP: Yeah. Okay. I have no further 10 questions. 11 MR. HAWES: Thank you, Ms. Stump. Does 12 anybody on the Rate Commission have any questions for 13 this witness? 14 Mr. Mahfood. 15 EXAMINATION 16 BY MR. MAHFOOD 17 Q. I know we've addressed this in the past 18 speaking about the credits. I'm still -- you may not 19 be the right person to answer this question. I think 20 you are -- looking at the credits, I totally agree 21 with the principles you just talked about and the 22 reasoning behind them. 23 Would that reasoning not also hold up even 24 more strongly if these -- if the credits were 25 recognized on an annual basis and there was some kind Examination of Mr. Unverferth By Mr. Mahfood (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 107 1 of annual, rather than just an upfront, you know, cash 2 payment? Some incentive on an ongoing basis to 3 maintain and keep it -- keep those activities in 4 place? 5 Q. I would like to talk about what it would 6 cost to run a program like that. If you're looking at 7 135 -- let's just say, you know, we had to 8 participate -- I can't recall what the 9 participation -- if I would have to manage a program 10 like that, you know, my cost would be more -- I mean, 11 all you're doing is adding additional costs to the 12 program to do it on an annual basis versus lowering 13 somebody's bill from 2.25 to $1.12. 14 It's more about the cost to manage the 15 program of that, and that would be above and beyond 16 what we're already managing with regard to regulatory 17 BMPs which right now is up to close to 6,000, so you'd 18 be adding significant -- and there's significant 19 costs. Right now we don't even -- those are on a 20 three- to five-year. So we don't even address those 21 on an annual basis because of the number. 22 Q. So -- so the biggest issue is really the 23 management and cost on an ongoing basis -- 24 A. Right. 25 Q. -- not really justifying? Examination of Mr. Unverferth By Mr. Mahfood (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 108 1 A. Versus a one-time reimbursement. 2 MR. MAHFOOD: Okay. All right. 3 MR. HAWES: Thank you, Mr. Mahfood. 4 Other questions from the Commission members? 5 Hearing none. 6 Ms. Myers? I'm sorry. Ms. Myers? 7 MS. MYERS: I do not have any. Thank you. 8 MR. HAWES: Okay. Thank you. Hearing none. 9 Mr. Unverferth, thank you. 10 THE WITNESS: Thank you. 11 MR. HAWES: Ms. Myers, are you ready to call 12 your next witness? 13 MS. MYERS: The District would like to call 14 Henrietta Locklear. 15 * * * * * 16 HENRIETTA LOCKLEAR, 17 having been duly sworn, testifies as follows: 18 * * * 19 MR. HAWES: Questions from the Rate 20 Commission for Ms. Locklear? Nothing from the Rate 21 Commission? 22 We will move on to Mr. Neuschafer. Any 23 questions for Ms. Locklear? 24 MR. NEUSCHAFER: Yes. 25 MR. HAWES: Come forward. Examination of Ms. Locklear By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 109 1 EXAMINATION 2 BY MR. NEUSCHAFER 3 Q. Good morning. I hopefully just have a 4 question or two here. I'm looking at your surrebuttal 5 testimony. Question 1 where you discuss an 6 individualized fee determination for -- I assume this 7 is for amount of impervious to be on a particular 8 property. Is that what you're discussing here? 9 A. It's both impervious and -- degree of 10 perviousness is what I'm talking about of 11 non-impervious property. 12 Q. Okay. And you're discussing that there are 13 some utilities, or at least one utility in Wilmington, 14 Delaware, that by fee application will make a 15 property-specific determination of pervious or 16 impervious area? 17 A. My understanding of that utility's process 18 for -- it's a type of appeal is that customers can ask 19 for a change in the runoff factor that's assigned to 20 their property. It differs from the class runoff 21 factor that their property is in based on their 22 individualized types of land cover on the property. 23 Q. Okay. And you make a conclusion that this 24 approach would be complex, time-consuming, and more 25 prone to errors; is that correct? Examination of Ms. Locklear By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 110 1 A. Right. 2 Q. Can you help me understand how a more 3 individualized property-specific determination is more 4 prone to errors? 5 A. Well, in this case, I'm talking about a 6 specific type of individualized calculation. So 7 I'm -- I'm asserting that to go property by property 8 and assign different factors or varying types of -- to 9 basically have a gradient of perviousness for each 10 individual property based on the characteristics of 11 that individual property would be more time-consuming 12 and expensive than what the District is proposing in 13 the rate proposal. 14 Q. And I can understand more expensive and 15 time-consuming. 16 A. Uh-huh. 17 Q. It's the more prone to errors part that I'm 18 trying to understand better. 19 A. Right. Right. Well, the -- I would say 20 that if the District were to use, for example, 21 measurement of that factor from aerial photography -- 22 and again, I'm talking about determining gradients of 23 perviousness based on land cover -- that there could 24 be, you know, possibilities for error within that 25 approach that are not the same possibilities for error Examination of Ms. Locklear By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 111 1 that are involved in determining -- strictly 2 impervious -- determine impervious area versus 3 pervious area within the property. 4 Q. I guess I'm having trouble following that, 5 you know. If the baseline is we use aerial 6 photography to determine perviousness or amount of 7 area, how it can be more error-prone to actually go 8 out and visit the property or perhaps walk the 9 property, take measurements of the property? I 10 actually dedicate manpower to visiting and inspecting 11 the property versus just relying on some sort of 12 aerial photography. 13 A. And for example, measuring the infiltration 14 rates of individual sections of the property. I mean, 15 you know, I mean, just the question of balance here is 16 what I would return to is, you know, there -- you have 17 a certain amount of data that needs to be maintained 18 and updated as a part of an impervious area rate 19 structure versus one that differentiates, you know, 20 again, gradients of pervious area on an individual 21 property basis. 22 Q. I guess I'm still not following how it's 23 more prone to error to make a property-specific 24 determination. 25 A. Well, the more data that we have to maintain Examination of Ms. Locklear By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 112 1 over time, you know, it's more prone to get out of 2 date, for example. And there, I guess, there are all 3 kinds of ways that one could try to carry this type of 4 rate structure out. But -- 5 Q. Would you generally agree that one could 6 make a better decision by accumulating more data than 7 by less data or more specific decision? What I'm 8 struggling with here is if there's appeals process 9 whereby a property-specific inspection can occur and 10 you can go out and gather additional data about that 11 specific parcel of property, whatever that data may 12 be, aren't you then able to make a more specific 13 determination with respect to that piece of property 14 then by just having some general -- general data? 15 A. I think that's true. And if I'm not 16 mistaken, the District made accommodation for that 17 type of individualized reconsideration in the previous 18 charge that was implemented and would or could do 19 something similar in this case as well under an 20 impervious area of rate structure. 21 Q. Is it your understanding that such a -- such 22 a process is included in the current proposal? 23 A. I can't say for sure. 24 MR. NEUSCHAFER: Okay. Thank you. That's 25 all I've got. Examination of Ms. Locklear By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 113 1 MR. HAWES: Thank you, Mr. Neuschafer. 2 Ms. Stump, do you have questions for 3 Ms. Locklear? 4 MS. STUMP: I do. 5 EXAMINATION 6 BY MS. STUMP 7 Q. Hello. So, Ms. Locklear, when I read your 8 surrebuttal testimony, it's really an effort to rebut, 9 I think, a lot of what Ms. Lemoine said about vacant 10 property and how she was recommending that it be 11 considered. 12 When I read your testimony, to me, it says 13 that: "Figuring out whether soil is compacted and, 14 therefore, less pervious is expensive and 15 time-consuming." 16 Is that an accurate summary of what you -- 17 A. Yes. That's my testimony. 18 Q. I know you say it's more expensive and 19 time-consuming, but I would like your opinion. Do you 20 think that figuring out whether soil is compacted and 21 therefore less pervious is fair and reasonable? 22 A. The rate structure that the District is 23 proposing is an impervious area one. And it's fair 24 and reasonable and under another type of rate 25 structure. I think the assessment of compacted or it Examination of Ms. Locklear By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 114 1 could be a fair and reasonable component of that type 2 of rate structure, but it's not the one that the 3 District is proposing. 4 Q. Well, let me explore that a little bit. So 5 under another type of rate structure, what do you 6 mean? 7 A. Well, for example, the rate structure that 8 Ms. Lemoine gives as a part of her testimony which is 9 a different sort of rate structure. 10 Q. But I guess, if looking at a vacant lot 11 that's full of compacting dirt, would you agree that 12 that does contribute runoff? 13 A. It does. 14 Q. Then, I guess, I'm just struggling if 15 that -- why -- why it's not fair and reasonable to 16 utilize that. I mean, I understand you're saying that 17 it's expensive and time-consuming, but I guess I'm 18 asking why -- why do you not believe it's fair and 19 reasonable under the current District's method? 20 A. It's -- it would be -- I guess, it's just an 21 alternative approach to what the District is using. 22 The District is basing the charges on the amount of 23 impervious area on the property, and that's an 24 accepted rate structure and it's fair and reasonable. 25 Taking into account some other factors, it's a Examination of Ms. Locklear By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 115 1 different rate structure which, you know, others have 2 implemented in a way they feel is fair and reasonable. 3 It's just not a part of this rate structure. 4 Q. But it could be if you -- you said it was an 5 alternative? 6 A. It's an alternative rate structure. 7 Q. Okay. Let me try another question. So 8 if -- if -- I believe, also, in your testimony, one of 9 the statements that you make is that many utilities 10 implement impervious area fees and do not charge for 11 vacant land; is that correct? 12 A. That's true. 13 Q. And I understand that's your testimony, but 14 also, have you ever worked with any utilities that do 15 bill making parcels for stormwater runoff or that vary 16 rates depending upon the character of the soil? 17 A. I haven't worked with any that vary the -- 18 based on the character of the soil. I have worked 19 with utilities that have a fee for parcels with no 20 impervious area before. 21 Q. In your experience with those, I mean, if 22 those are determined to be appropriate in those types 23 of utilities, why is it not appropriate for the 24 District? 25 A. Well, one of the -- I guess, you know, Examination of Ms. Locklear By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 116 1 utilities implement rate structures that fit their 2 circumstance well, and there are -- there's more than 3 one acceptable way to implement rate structures. 4 And so in this case for MSD, the rate 5 structure that was the best is to charge based on 6 impervious area and not impose a different rate 7 structure at all, and that includes compacted earth or 8 minimum fee per parcel, and I think that's an 9 acceptable approach for them. 10 Q. So it's a policy decision? Is that how you 11 would -- as to whether or not to use that in this case 12 for vacant land? 13 MS. MYERS: We don't know. 14 A. I would say it's a policy -- rate structure 15 policy decision. 16 Q. (By Ms. Stump) Just let me check real quick. 17 And just -- then one follow-up question kind of along 18 the same lines. 19 So in your testimony when you say this -- 20 we're talking about individualized fee determination, 21 you say "This determination is available by 22 application. I am not aware of any utilities that 23 apply such a methodology to a significant portion of 24 their properties." 25 What do you mean by "significant portion"? Examination of Ms. Locklear By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 117 1 So you are aware of some that do smaller -- can you 2 explain a little bit? 3 A. Well, that maybe isn't stated as clearly as 4 it should have been for your reading. But what I was 5 trying to say there is that this determination of 6 application -- and this is probably an assumption -- 7 is, you know, limited in nature to customers who would 8 like this individualized determination. 9 What I was talking about was implementing 10 this, you know, individualized pervious gradient 11 determination to properties as a whole or a whole 12 class of properties within a rate structure. 13 Q. So when you're saying "I am not aware of any 14 utilities that apply such a methodology to a 15 significant portion of their properties," again, what 16 do you mean by "significant"? 17 A. For example, it's not part of their rate 18 structure to go to every single property and make an 19 individualized determination. Again, I'm talking not 20 about individual fee calculations which is a component 21 of how the District is doing their property. 22 But instead, I'm talking about an 23 individualized determination of perviousness for 24 varying portions of the property for, you know, a 25 whole class of customers within the rate structure, Examination of Ms. Locklear By Ms. Stump (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 118 1 for example. 2 MS. STUMP: Okay. I think I'm -- no more 3 questions. 4 MR. HAWES: Thank you, Ms. Stump. 5 Any questions for Ms. Locklear from the 6 Commission? 7 Hearing none. 8 Ms. Myers? 9 MS. MYERS: I do not have any. 10 MR. HAWES: Very good. Thank you, 11 Ms. Locklear. 12 MS. MYERS: The District has just one more 13 witness. 14 MR. HAWES: Uh-huh. Yeah. 15 MS. MYERS: I don't know. Do you want to go 16 ahead and call him? 17 MR. HAWES: I would say let's do it because 18 we're going to lose our forum at 1:00, so I was going 19 to hold lunch till 1 anyway. 20 MS. MYERS: Okay. 21 MR. HAWES: So if we can get the witness in 22 and out, that would be optimal. 23 MS. MYERS: Very good. The District would 24 like to call Marion Gee. 25 * * * * * Examination of Marion Gee By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 119 1 MARION GEE, 2 having been duly sworn, testifies as follows: 3 * * * 4 MR. HAWES: Questions for Mr. Gee from the 5 Rate Commission? 6 Mr. Palans. 7 EXAMINATION 8 BY MR. PALANS 9 Q. Good afternoon, Mr. Gee. 10 A. Good afternoon. 11 Q. We're after noon, so we suddenly change. 12 It's your conclusion that it's in the best 13 interest of the District that the District not incur 14 debt to finance this stormwater capital program; 15 correct? 16 A. Yes, sir. That's correct. 17 Q. And I happen to agree with you. Have you 18 ever heard the term "protecting a balance sheet"? 19 A. I have. 20 Q. And do you believe not incurring debt for 21 this project is accomplishing just that, protecting 22 the balance sheet? 23 A. Yes, sir. I do believe that it helps us to 24 do that. 25 Q. And it creates a flexibility for the Examination of Marion Gee By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 120 1 District in the future by not having covenants, loaned 2 covenants to comply with on this; correct? 3 A. Yes, sir. That's correct. 4 Q. And it avoids cost and the expenses 5 associated with that debt for the District; correct? 6 A. That is correct. 7 Q. A question I have is really based on the 8 assumption that this rate proposal is approved, and 9 the District has three years from now $30 million of 10 revenue that has been raised pursuant to this rate 11 proposal. Okay? 12 I would like to ask you, that $30 million is 13 dedicated for what purpose? 14 A. Well, that $30 million could be dedicated 15 for this program which would be to address local and 16 regional flooding and erosion issues. 17 Q. And specifically, the $30 million would be 18 dedicated to what we've described as these 483 CIRP 19 projects; is that correct? 20 A. Well, it would be dedicated to projects that 21 are approved and are constructed, again, to address 22 flooding and erosion control. It could be those 23 483 projects, but as Brian testified earlier, you may 24 have projects that may be rectified by the time we 25 would be, let's say, five years out. What's on that Examination of Marion Gee By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 121 1 list today may change, I guess, is what I'm saying. 2 Q. I get it. I get it. But whatever the 3 composition of that list is, whatever the CIRP 4 projects are that are memorialized on that list, 5 that's what the money is used for; correct? 6 A. Correct. It would be to address those 7 projects. 8 Q. And that money can't be used for any other 9 purpose? 10 A. Well, again, the purpose of this rate would 11 be to address those projects. 12 Q. Right. But what I'm suggesting is, you 13 can't take this $30 million and use it for wastewater. 14 A. You cannot use wastewater or stormwater 15 funding. You can't use stormwater funding for 16 wastewater purposes. 17 Q. So the $30 million is dedicated to remediate 18 the projects that had been identified on the list, on 19 the scorecard; fair enough? 20 A. That is correct. 21 Q. As that scorecard may change, identifying 22 additional properties or fewer properties as time goes 23 on; right? 24 A. Correct. 25 Q. And just help me understand. What do you do Examination of Marion Gee By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 122 1 internally with the money to assure that it is 2 dedicated to these projects? What assurance can you 3 give the public that these funds are dedicated? 4 And let me just rephrase that. From an 5 accounting standpoint, do you segregate the funds? 6 A. We do. 7 Q. Do you physically segregate the funds in a 8 separate account? 9 A. By account, are you referring to a bank 10 account, or are you talking about an accounting fund? 11 Q. Well, I'm really talking about both. Is it 12 done -- do you segregate in a separate bank account 13 the $30 million? 14 A. No, we do not. 15 Q. And so you segregate it on your books; is 16 that what it is? 17 A. Yes, we do. Which is typical. 18 Q. Okay. And you segregate it for both capital 19 labor associated with these projects as well as 20 construction of the projects? 21 A. Well, we have one fund. It's not split out. 22 There's not a fund for capital labor and not a fund 23 for capital construction. There's one fund that would 24 account for the revenues for the internal program. 25 Q. Yeah. The reason I'm asking the question Examination of Mr. Gee By Mr. Stein (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 123 1 is, in prior hearings when we were talking about the 2 number of full-time employees that were dedicated to 3 this fund, I think the testimony was it takes 4 40 full-time employees to fulfill the requirements 5 that these remediation or these projects require; 6 correct? 7 A. I believe that was the number. 8 Q. Okay. So in terms of -- you describe that 9 those employees as being dedicated to a capital labor? 10 A. Correct. If they worked on the stormwater 11 program and specifically on a capital project, we 12 would capitalize that labor cost. 13 MR. PALANS: Okay. I have no further 14 questions. Thank you. 15 MR. HAWES: Thank you, Mr. Palans. 16 Questions from the rest of the Rate 17 Commission? 18 Mr. Stein. 19 EXAMINATION 20 BY MR. STEIN 21 Q. Just a quick question for you. You 22 mentioned it is not allowed to spend stormwater 23 revenue for wastewater purposes or vice versa; is that 24 correct? 25 A. Correct. You typically would not do that. Examination of Mr. Gee By Mr. Beckmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 124 1 Q. How -- how do you deal with that restriction 2 in the combined sewer areas? 3 A. On that particular case, I would say that's 4 somewhat of a gray area. You're really -- you're 5 going to deal with the dual issues there. You're 6 doing projects that, of course, would benefit you on 7 the wastewater side. But part of the reason for that 8 project is because you could be getting stormwater on 9 INI issues that's going into your wastewater system. 10 So you could make the case in that particular instance 11 that you're addressing both stormwater and wastewater 12 issues. 13 What I was basically saying is that if we 14 were collecting this particular stormwater rate to 15 construct projects that deal with flooding and erosion 16 control, we would not take this revenue and use it for 17 a treatment plant expansion or to fix some other issue 18 of wastewater treatment plant. I think that's a 19 little bit more clearcut. 20 MR. STEIN: Thank you. 21 MR. HAWES: Thank you, Mr. Stein. 22 Any further questions? 23 Mr. Beckmann. 24 25 Examination of Mr. Gee By Mr. Beckmann (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 125 1 EXAMINATION 2 BY MR. BECKMANN 3 Q. If I could, please. Mr. Gee, does the 4 District accept grant funds from state or federal 5 authorities? 6 A. Yes, sir, we do. 7 Q. Okay. What typical projects would be funded 8 from those? 9 A. Well, I'll give you an example. Rich 10 mentioned that we had flooding that took place in 11 December of 2015. We also had another flooding event 12 in April of 2017. We've submitted and have been 13 approved for reimbursement request from FEMA. So 14 those are, in a sense, fulfillment of a grant. 15 So there's a number of other different 16 things that we participate in the state revolving fund 17 program which allows us to borrow money at discounted 18 rates in order to fund some of our projects. 19 Q. Are you then periodically audited by a state 20 or federal agency? 21 A. Yes, we are. We are typically depending on 22 the amount that you receive. You have to -- at least 23 once a year, we go through what used to be called an 24 A-133 audit which is really an audit for any federal 25 assistance that an entity may receive. Examination of Mr. Gee By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 126 1 There are varying thresholds in terms of the 2 audit procedures depending upon the amount of money 3 that you receive. But we typically have an A-133 4 audit conducted every year. In addition to that, the 5 agencies could decide to have their auditors come in 6 and examine our books as well. Those revenues or 7 those grants that we receive are also part of our 8 overall financial statement audit that our external 9 auditors conduct. 10 MR. BECKMANN: Okay. Thank you. 11 THE WITNESS: You're welcome. 12 MR. HAWES: Thank you, Mr. Beckmann. 13 Mr. Palans. 14 EXAMINATION 15 BY MR. PALANS 16 Q. Just one quick follow-up on Mr. Beckmann's 17 questions. Are any grants available from FEMA or any 18 other body to address the scorecard properties, the 19 CIRP capital projects? 20 A. There could be. FEMA has -- referred to as 21 mitigation dollars to help you -- to help communities 22 to address particular issues that should involve 23 flooding. So, and again, it really depends on the 24 dollar amount that fee is allocated for a particular 25 fiscal year as to kind of what may be available for a Examination of Mr. Gee By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 127 1 particular community, but yes, there are dollars that 2 are available. 3 Q. Yeah. I'm just looking at MSD Exhibit 30-L 4 which is the anticipated construction starts through 5 fiscal year '24 with priority ranking. And those 6 projects have priority rankings ranging in the first 7 year from 0.9 to 22. And my question is, do you 8 understand or believe or is there an opportunity to 9 receive third-party funds from FEMA or any other 10 grants that might remediate some of these costs? I 11 should say, supplement the costs of the District in 12 completing these projects? 13 A. I think that the District has testified that 14 we are not -- certainly not opposed to receiving 15 contributions from third-party entities. If there are 16 grants that are available which would allow us to 17 start some of those projects, we certainly would look 18 into applying for those grants. 19 Q. Who within the District is responsible for 20 determining whether grants might be available to 21 supplement the District's funds? 22 A. Well, I think we have multiple individuals 23 that would be responsible for that. For instance, 24 with respect to the flood events that we encountered, 25 what I mentioned earlier, I had reached out to FEMA to Examination of Mr. Gee By Mr. Palans (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 128 1 inquire about litigation dollars. That's kind of done 2 in conjunction with departments here. 3 Certainly, there is a role that our 4 engineering department plays., oftentimes, there are 5 restrictions placed on those funds. You have to make 6 sure those restrictions don't impact your project 7 schedules or requires you to do something that is 8 really not in the best interest of -- in terms of 9 getting in your -- your projects constructed timely. 10 So there's a number of factors there again. 11 There are several individuals here that 12 serve on national boards that you're made aware of 13 funding that may be available, so we discuss those 14 opportunities. So it's not really one person. 15 MR. PALANS: Okay. I would request, 16 Ms. Myers, if you could supplement a response to let 17 us know what, if any, efforts have been made by the 18 District to reach out for third-party grants that 19 would apply to the capital projects currently 20 scheduled to reduce the District's cost, either in the 21 first fiscal year or any fiscal year that may be 22 available. 23 MS. MYERS: I assume your counsel will 24 submit a discovery request. 25 MS. STUMP: If that's the way you want to Examination of Mr. Gee By Mr. Stein (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 129 1 handle it, we can do it that way. 2 MS. MYERS: Okay. Thank you. 3 MR. PALANS: I have no further questions. 4 MR. HAWES: Thank you, Mr. Palans. 5 Mr. Stein. 6 EXAMINATION 7 BY MR. STEIN 8 Q. Mr. Gee, I would like to go back just a 9 minute to the discussion around the combined sewer 10 versus the separate sewer issues. I think we all 11 understand and agree that in the separate sewer area, 12 we've got a lot of open channels, creeks, etc., that 13 are creating erosion problems, flooding problems, etc. 14 And the combined sewer area, about the only 15 open channel I know of is the River Des Peres, and 16 there are issues related to it and flood stage, etc. 17 But from the standpoint of ensuring that 18 this charge or rate is fair and reasonable, how do we 19 demonstrate that the $2.25 per ERU rate is equitable 20 for a resident within the combined sewer area 21 vis-a-vis a resident in the separate sewer area? How 22 do we make that fair and reasonable demonstration? 23 A. Well, we believe that the rate is fair and 24 reasonable because it's assessed based on the 25 impervious surface area of the property irrespective Examination of Mr. Gee By Mr. Stein (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 130 1 of if you're in the combined sewer area or outside of 2 it. 3 Q. But let's assume that we have -- for 4 discussion's sake, let's say we have a million 5 residents in St. Louis County. We have 300,000 in the 6 city. Let's say there are -- let's say 400,000 7 residents in the combined sewer area and 900,000 or 8 roughly twice as many in the separate sewer area as in 9 the combined sewer area. Should we not be spending 10 roughly twice as much money in the combined sewer 11 area -- or in the separate sewer area as in the 12 combined sewer area? 13 A. Not necessarily. Again, I would say you'd 14 have to look at the prioritization of those projects. 15 Some may be within the combined sewer area; some may 16 be outside of it. So that, I think, is what would 17 need to be done as Rich and Brian testified previously 18 regarding how we prioritize our projects. This would 19 be the same methodology that we would use to determine 20 where the projects are constructed. 21 MR. STEIN: Thank you. 22 MR. HAWES: Thank you, Mr. Stein. 23 Anything else from the Commission? 24 Mr. Neuschafer? 25 MR. NEUSCHAFER: Yes. Examination of Mr. Gee By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 131 1 EXAMINATION 2 BY MR. NEUSCHAFER 3 Q. Good afternoon. 4 A. Afternoon. 5 Q. Looking at your testimony, surrebuttal 6 testimony, Question 1. And about three sentences in, 7 you indicate that that funding would automatically 8 increase the overall cost of the program, since all 9 borrowed funds need to be paid back with interest; is 10 that correct? 11 A. Correct. 12 Q. Has MSD done any sort of analysis of the 13 impact of debt funding on the rates it would need to 14 charge or length of the program? Any specific impact 15 on the ratepayers program? 16 A. Well, again, what we've looked at is, it's 17 obvious if you borrow money, you're going to have 18 to -- with a bond issue, you're going to pay that back 19 with interest. We've testified before that there are 20 other considerations that we have to consider as well. 21 You're going to have coverage requirements which also 22 will impact the amount that you have to assess the 23 ratepayers. 24 So you're not just paying for the cost of 25 the projects now. You're paying for interests. Examination of Mr. Gee By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 132 1 You're paying for the additional coverage 2 requirements, and you're probably going to have to 3 have unlimited fund balance which means you're going 4 to have to assess more as well. 5 There's a potential impact on our wastewater 6 program. We've discussed that before and believe 7 we've provided copies of our rate agency reports to 8 the Commission. It thoroughly details in there 9 there's a concern by some of the rating agencies with 10 respect to any increases in debt coverage. 11 So our wastewater program is $4.7 million. 12 What we're talking about here is roughly a $30 million 13 program here. In my opinion, it's not wise or prudent 14 for us to risk funding our wastewater program with 15 debtors, for instance, by way of which certainly would 16 have a much more of an impact in terms of keeping 17 rates affordable on the wastewater side versus trying 18 to issue debt to fund a $30 million program. 19 Q. And I believe you've just restated the 20 arguments that MSD has been making all along. I 21 understand those from a sort of hypothetical 22 perspective -- 23 A. Well, those are facts. They are not a 24 hypothetical. 25 Q. Well, what I'm trying to understand is, have Examination of Mr. Gee By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 133 1 you actually performed a study to show the impact 2 of -- let's say, for example, you funded half of the 3 program through a bond? 4 A. We've not conducted a full study per se. 5 But again, I think for me, commonsense tells me that 6 if I have to debt fund a portion of this capital 7 program, customers in the long term are going to pay 8 more. 9 Q. You then go on in your testimony to refer to 10 an EPA metric for affordability. Can you help explain 11 what that metric for affordability is, where it comes 12 from, etc.? 13 A. Yes. EPA has a threshold they utilize in 14 order to determine if a wastewater rate and, for that 15 matter, water rates are deemed to be affordable. And 16 what they look at is, typically, if your rates are 17 within 2 percent of a medium household income for a 18 community that you serve, that's deemed to be 19 affordable. 20 Q. Is there a -- I'm looking for the source of 21 this information. If I want to go look up a document 22 that explains to me how EPA arrived at this metric for 23 affordability or how EPA applies this metric for 24 affordability, does such a document exist? 25 A. Yes. There are documents that exist. Examination of Mr. Gee By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 134 1 Q. Do you know where -- what that document is, 2 or what those documents are? 3 A. Well, EPA has guidance that they publish. 4 I'm assuming you can get that probably from EPA, if 5 you desire. 6 Q. You then apply EPA's metrics for 7 affordability, and I guess the follow-up question 8 there is, have you factored in at all any impact from 9 the proceeding, that I understand will commence next 10 year about wastewater rates? 11 A. Well, I don't know what those rates are 12 going to be. So to answer your question, I believe 13 not. We've looked at simply what are our customers 14 paying today on the wastewater side, and what are we 15 asking for with respect to this particular rate 16 proposal? 17 MR. NEUSCHAFER: Okay. Thank you. 18 THE WITNESS: Yes, sir. 19 MR. HAWES: Thank you, Mr. Neuschafer. 20 Ms. Stump, do you have any questions? 21 MS. STUMP: I do not have any questions. 22 MR. HAWES: Oh, great. Anybody on the Rate 23 Commission? Questions? 24 Ms. Myers. 25 MS. MYERS: I do not have any questions. Examination of Mr. Gee By Mr. Neuschafer (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 135 1 MR. HAWES: All right. Very good. Thank 2 you, Mr. Gee. I appreciate it. 3 THE WITNESS: Thank you, sir. 4 MS. MYERS: That concludes the District's 5 witnesses. 6 MR. HAWES: All right. Then we have one 7 more agenda item, and we'll take a motion on that. 8 MR. STEIN: Motion to adjourn. 9 MR. HAWES: Bearing motion. Second? 10 MR. MAHFOOD: Same. 11 MR. HAWES: Very good. All in favor. 12 COMMITTEE MEMBERS: Aye. 13 MR. HAWES: We're adjourned. Thank you very 14 much. 15 (The MSD technical conference for 16 surrebuttal concluded.) 17 18 19 20 21 22 23 24 25 (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 136 1 REPORTER CERTIFICATE 2 I, Dawn M. Bloemker, an Illinois Certified 3 Shorthand Reporter, Missouri Certified Court Reporter, and Registered Professional Reporter, do hereby 4 certify that there came before me on June 7, 2018, at the Metropolitan Sewer District, 2350 Market Street, 5 St. Louis, Missouri 63103 6 MSD TECHNICAL CONFERENCE FOR SURREBUTTAL 7 with witnesses who were first duly sworn; that the witnesses were carefully examined; that said 8 examination was reported by myself, translated and proofread using computer-aided transcription; and the 9 above transcript of proceedings is a true and accurate transcript of my notes as taken at the time of the 10 examination of the witnesses. 11 I further certify that I am neither attorney nor counsel for nor related nor employed by any of the 12 parties to the action in which this examination is taken; further, that I am not a relative or employee 13 of any attorney or counsel employed by the parties hereto or financially interested in this action. 14 15 Dated June 14, 2018. 16 17 18 19 ______________________________________ Dawn M. Bloemker, CSR, RPR, CCR 20 21 22 23 24 25 (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 137 A A-133 125:24 126:3 a.m 3:7 5:12 abided 70:2 ability 18:17,22 48:9 53:19 55:21 57:12 58:10 65:21 able 8:10,16 53:4 64:21 67:11 69:25 85:19 86:4,5 90:22 99:13,14 106:6 112:12 absent 70:16 absolutely 36:15 accept 125:4 acceptable 39:17 88:17 116:3,9 accepted 114:24 accommodation 112:16 accompanied 18:14 accomplishing 119:21 account 39:5 53:17 114:25 122:8,9,10,12 122:24 accounting 122:5 122:10 accumulating 112:6 accurate 8:16 9:1 113:16 136:9 acquisition 27:4 27:16,23 action 103:21 136:12,13 activities 38:4 61:2 107:3 actual 15:2,5 34:23 35:2 61:9 add 54:8 66:8 99:5 added 34:13 adding 107:11,18 addition 51:25 126:4 additional 19:13 22:19 29:3,5,25 30:7 43:7 48:10 53:20 54:9,11 54:12 55:12 58:20 59:17 69:1,13 70:2 79:20 80:21,21 93:16 103:19 107:11 112:10 121:22 132:1 address 7:1 24:25 25:13 32:8 37:3 37:12,12 38:7 43:12,18 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check 84:2 116:16 checkpoints 81:23 Chesterfield 4:11 choice 100:22 circumstance 116:2 CIRP 25:17 26:9 28:23 29:3 30:14 38:12 94:5,8 120:18 121:3 126:19 cite 45:4 city 17:25 18:1 33:12 54:4 76:4 130:6 civic 84:6 clarify 76:10 94:19 95:13 clarifying 104:9 class 109:20 117:12,25 classes 18:25 46:1 93:11 cleaning 29:7,7 clear 56:16,18 91:6 clearcut 124:19 clearly 117:3 close 25:8 73:7 107:17 closer 71:10 Club 18:2 clubhouse 85:23 Coalition 18:1 cognizant 70:4,6 collect 55:8 57:8 65:21 82:14 collecting 41:22 124:14 collectively 98:11 98:22 99:6 collects 79:11 combine 86:17,22 87:16 combined 124:2 129:9,14,20 130:1,7,9,10,12 130:15 come 64:21 67:13 74:13,19 76:15 79:20 102:14 108:25 126:5 comes 35:2 43:6 49:16 57:6 59:12 63:11 66:11 79:8 89:3 133:11 comfortable 69:25 coming 7:9 69:1 69:10 79:25 commence 134:9 comment 7:22 22:23 67:9 comments 77:10 commercial 62:3 62:7 commercial-ind... 17:12 Commission 3:21 3:24 4:9 5:13,17 7:12 12:19 13:5 13:7,19 17:3,9 17:11,18 18:5 18:13 19:1,4,10 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computer-aided 136:8 conceptual 25:18 26:10 27:3,5,10 27:15,22 28:8 28:15 34:5 35:11 36:22 concern 8:15,25 14:10 66:12,13 78:3,4 79:20 100:14 132:9 concerned 13:22 concerns 23:12 34:14 69:10 concluded 135:16 concludes 135:4 conclusion 109:23 119:12 condition 77:24 conditions 26:2 83:10 conduct 126:9 conducted 126:4 133:4 conference 1:1 3:2,6 5:2 14:22 16:22 20:5,9,24 21:10 26:14 135:15 136:6 conferences 7:11 12:24 confidence 9:5 37:20 confirm 24:20 confirmed 48:15 conjunction 128:2 consent 67:11 consider 60:5 87:18 89:10 131:20 consideration (877) 421-0099 PohlmanUSA.com PohlmanUSA Court Reporting Page 140 11:7 14:16 27:16 29:1 80:7 97:14 101:9 considerations 79:1 85:9 131:20 considered 113:11 considering 69:11 98:24 consist 81:18 consistent 10:25 11:18 14:6 15:7 18:15,19 41:9 48:20 101:16 104:5 consistently 41:2 consists 17:18 constantly 61:11 constituents 57:16 constitutional 18:15 construct 124:15 constructed 120:21 128:9 130:20 construction 17:22 26:6 30:8 50:6 54:7,13 81:19 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quite 61:16 quorum 6:19 11:6 11:10 12:16 14:18 quote 31:17 43:10 quoted 25:17 quotes 91:25 quoting 36:7 R R 3:11 rain 101:5,6,23 106:7 rainfall 70:16 rains 67:2 raised 49:2 102:8 120:10 ramp 67:15 ranging 127:6 ranking 72:19 74:24 127:5 rankings 127:6 rare 44:15 rate 3:21,24 4:9 5:13,15,17 7:10 7:12 8:17 12:19 13:5,6 14:23 17:3,9,11,18 18:4,5,7,12,13 18:14 19:1,2,3,4 19:10,12,13,15 19:16,20,24 20:2,6,7,11,12 20:14,21 21:1,4 21:5,6,14 22:3,5 22:7,12 23:12 24:8,14,24 25:3 28:7 31:3,4,21 32:3,12 35:19 37:23 38:7 42:22 47:10,11 49:2,17 53:18 60:14 67:20 68:1 82:15 87:19 93:16,25 96:24 97:25 102:25 106:12 108:19,20 110:13 111:18 112:4,20 113:22 113:24 114:2,5 114:7,9,24 115:1,3,6 116:1 116:3,4,6,14 117:12,17,25 119:5 120:8,10 121:10 123:16 124:14 129:18 129:19,23 132:7 133:14 134:15 134:22 ratepayers 18:25 21:17 37:10 46:1 48:8 53:18 55:2,6 58:3 59:22 84:14 93:11 131:15,23 ratepayers'32:14 60:2 84:11 rates 17:5,6,6 58:3 93:10 111:14 115:16 125:18 131:13 132:17 133:15 133:16 134:10 134:11 rating 38:17,19 132:9 ratio 47:4 95:23 104:17 ratio's 95:23 rationale 38:19 ratios 104:21 Ratzki 6:14 reach 128:18 reached 127:25 reaction 87:22 89:12,14 97:15 read 7:2 19:18 105:6 113:7,12 reading 47:24 117:4 readjust 59:15 readjusted 56:12 93:5 ready 23:15,18 35:4 77:8 82:5 108:11 real 54:3,22 84:22 87:11 90:7,11 116:16 realize 89:25 really 9:7 14:6 32:1,1 54:24 76:20 85:25 89:12 94:18 97:10,16,24 99:8 100:17 107:22,25 113:8 120:7 122:11 124:4 125:24 126:23 128:8,14 reason 61:15 75:10 122:25 124:7 reasonable 18:24 38:7 46:1 55:2,6 57:7 58:3 59:22 60:1 83:20 93:11 113:21,24 114:1,15,19,24 115:2 129:18,22 129:24 reasoning 106:22 106:23 reasons 38:2,3 rebut 113:8 rebuttal 20:23,25 47:20 recall 43:15 86:2 107:8 receipt 18:4 receive 100:11 101:4 125:22,25 126:3,7 127:9 received 19:1 30:15 99:24 receives 19:1 30:20 99:24 receiving 35:18 69:18 127:14 receptive 46:2 recognized 106:25 recommend 18:5 57:5 recommendatio... 17:4 recommended 18:12 recommending 113:10 reconsideration 112:17 record 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